Energy minister to tell North Sea oil firms to drill or be damned

In a report to be published this week by the government's North Sea task force PILOT, Wicks will reveal details of a new scheme that allows him to force oil companies to invest in fields where evidence of oil has been found.

Under the terms of the Stewardship initiative, the Department of Trade and Industry has greater powers to order companies to give up or sell assets that are not being drilled.

Wicks will also warn that unless such drastic moves are taken the North Sea could be extinct as an oil-producing basin by 2035 - with billions of barrels of oil left under the seabed.

In the report, Wicks warns that it is "important that licences are in the hands of players with the appetite, expertise and capital to fully exploit all opportunities".

He adds: "It is clear that the UKCS [United Kingdom Continental Shelf] has a prosperous future, but to a large extent the overall outcome will be greatly determined in the next few years. We must strive to protect and prolong the life of our infrastructure and use these valuable assets effectively to target and extract the wealth of reserves that remain below our waters."

Wicks describes the Stewardship programme as "a framework to monitor the efficiency of each producing asset" in the North Sea. Oil companies have already been asked to provide extensive drilling records stretching back to 2002 for each of their assets in the initial phase of the scheme.

It has been estimated that as many as 20 to 30 licences will attract criticism on the back of the data being supplied. The DTI is expected to begin indicating which fields require further action by the end of this month.

Wicks is also committed to further reform of the Fallow Field Initiative, "to ensure we achieve the vision of no inactive assets".

One senior oil industry source said: "The Stewardship idea of visiting plans or intentions with regard to acreage is accepted as a good idea as, if nothing else, it will stimulate internal discussion around what the companies are going to do.

"If the answer is 'not much' then they'll have to give it up. That could lead to some focused debate about acreage holdings internally at all the companies."

Other details in the report designed to accelerate the number of asset deals include plans to devise a standardised formula for decommissioning costs of North Sea fields. The industry's total decommissioning costs are currently estimated at 15bn to 19bn. The division of these costs is often cited as a barrier to asset deals.

A report commissioned jointly by the DTI and oil industry trade body UKOOA has shown that if North Sea exploration fell back to the levels seen in 2002 and 2003, 40% of the rigs and platforms in the North Sea would need to be decommissioned by 2020.

That would see the North Sea oil industry disappear by 2035, with more than 50% of the UK's oil reserves left trapped below the seabed.

If investment levels can be maintained at the rates seen towards the end of last year the North Sea's life will be extended considerably. The government believes that ensuring the assets are in the hands of the right companies is the easiest way to achieve this.

The high crude prices have slowed the number of deals taking place in recent months, with the majors more reluctant to sell producing assets.

A spokeswoman for UKOOA said: "The Stewardship initiative is an initiative that the oil and gas industry and the government have developed together for more than a year, and UKOOA is fully supportive of it.

"It will identify those fields already in production which merit further investment and provide the stimulus to secure the capital required to prolong the field's life and maximise the recovery of its reserves. Joint DTI/industry research indicates that an additional three billion to five billion barrels of oil equivalent could be recovered from existing fields, over and above reserves targeted in current plans."