THE UK Government today pledged to fast-track a “game changing” blueprint for the future of Britain’s oil and gas industry which is set to unlock an extra £200 billion for the UK economy over the next 20 years.
The reforms, championed by oil tycoon Sir Ian Wood, will be spearheaded by the establishment of a new industry regulator aimed at maximising the recovery of untapped reserves in the UK continental shelf through a new spirit of cooperation between rival energy giants and the Government, and through the encouragement of more efficient exploration, development and production in the North Sea.
Ed Davey, the Energy Secretary, today hailed the publication of Sir Ian’s wide-ranging review as a “seminal moment” in the history of Britain’s oil and gas industry.
He said the Government had accepted Sir Ian’s recommendations in full. And he vowed to press ahead with the implementation of the changes would could lead to the recovery of up to an additional four billion barrels of North Sea oil and gas, boosting the British economy by a potential £200 billion by 2034.
Mr Davey said: “We think this report is a game-changer for the North Sea.
“I fully back Sir Ian Wood’s recommendations and we will start implementing them immediately. We think it is right to press ahead with gusto with these recommendations. We think it is vital for our energy security and for tax revenue and for our economy.”
Her said he expected to see a shadow regularity body for the industry operating by the autumn and a chief executive appointed by the summer of this year, with the necessary legislation for the establishment of the new oversight organisation being brought before the next session of Parliament.
Prime Minister David Cameron also endorsed the industry’s blueprint. He said: “For many years the UK has supported the North Sea oil and gas industry and we have worked together to make this an economic success the whole country can be proud of. I promise we will continue to use the UK’s broad shoulders to invest in this vital industry so we can attract businesses, create jobs, develop new skills in our young people and ensure we can compete in the global race.”
Sir Ian, the former head of the Wood Group, said: “I see this as a watershed opportunity to ultimately reshape the regulatory environment, extend the life of the UKCS and bring at least £200 billion additional value to the economy over the next 20 years. We need to step up our game to maximise the recovery of our hydrocarbon reserves and attract more investment.
“The industry has some strong challenges but some great opportunities. New discoveries are much smaller, many fields are marginal and they are now very much more interdependent. There is strong competition for ageing infrastructure and the UKCS is more like a patchwork of interdependent and interconnected operations.”
He added: “Exploration is clearly at a worrying all-time low and, right now, if it continues we are in danger of leaving a significant amount of our reserves in the ground.”
There had been “too many failures to connect and cooperate, too many disputes and too many lost opportunities,” according to Sir Ian.
John Swinney, the Scottish Finance Secretary, also welcomed Sir Ian’s report. He said: “I firmly agree with the recommendation for a new regulator, and a shadow body should be set up without delay. This should be located in Europe’s Oil and Gas capital of Aberdeen.
“The Scottish Government supports the full implementation of Sir Ian’s proposals for a stronger, more effective regulatory body, which if implemented quickly can bring enormous progress in the recovery of oil and gas in the North Sea. Time is of the essence.”
But he claimed: “The North Sea has suffered from poor stewardship from the UK Government to date, and the time has come to address that. Sir Ian has confirmed that fiscal instability has been a significant factor in basin underperformance in the North Sea. The Scottish Government has outlined that stability and predictability are the principals which will govern the fiscal regime in an Independent Scotland.
“The decisions of successive Westminster governments to spend Scottish oil revenues rather than investing a proportion of them also represents a major lost opportunity. Therefore, Scotland’s Future proposes, as recommended by the Fiscal Commission Working Group, that an independent Scotland should establish a Scottish Energy Fund to stabilise revenues in the short-term and to ensure that a proportion of oil and gas tax receipts are invested for the long-term benefit of the people of Scotland.”
According to Sir Ian’s report, production has fallen by 40 per cent in the last three years, and the efficiency with which oil and gas is produced has fallen to 60 per cent, costing the economy £6 billion.
Malcolm Webb, the chief executive of Oil and Gas UK, said that the publication of Sir Ian’s report could not be more timely.
He said: “Our activity survey, which is going to be published tomorrow, will clearly show we do face a number of significant challenges. On the one hand we have record capital investment - over £14 billion of capital investment last year - but on the other hand we havea slump in exploration activity and record operating expenditure last year.”