North Sea oil wells on hold ahead of key statement

Investment in North Sea oil and gas has fallen substantially in the last year as companies await key developments expected in the Chancellor’s autumn statement.

A report by Deloitte says George Osborne must make the North Sea fiscal regime more predictable. Picture: PA

A report by Deloitte, published today, says George Osborne must make the North Sea fiscal regime more predictable, with lower taxes and more incentives to boost activity.

Derek Henderson, senior partner in Deloitte’s Aberdeen office, said: “This is the most important autumn statement for some time now, as it could be the last chance to get the fiscal regime right.”

The accountancy firm found that just four deals were announced in the three months to September, down slightly on five in the previous three months but “substantially lower” than the 14 announced in the same period in 2013.

Henderson said the drop in deals may be down to North Sea operators waiting for clarity about the future of the UK Continental Shelf (UKCS).

In particular, firms are waiting for more detail about the implementation of the Wood Review, including formation of the Oil & Gas Authority, and changes to the North Sea’s fiscal regime, Deloitte said. These measures are due to be detailed on 3 December.

Henderson said: “The industry continues to wait and see how the future of the North Sea will take shape.

“This is a particularly interesting year for the UKCS as it goes through a period of transition. There remains much change on the horizon and, as a result, many companies will be biding their time.

“All eyes will be on the Chancellor’s autumn statement, where industry will be looking for measures which support the challenges of operating in this mature basin.”

The report also found 11 exploration and appraisal wells were drilled in the third quarter of 2014, up on the seven reported in the previous three months.

That was consistent with the 11 announced during the same period last year.

But Deloitte said price pressure and access to finance have remained issues on the UKCS.

However, there are opportunities to be had as the North Sea matures. A separate report, by Scottish Enterprise, yesterday highlighted that around £30 billion is forecast to be invested on decommissioning North Sea oil and gas projects by 2040.

The dossier, produced in conjunction with Decom North Sea and consultancy Arup, highlights areas such as talent attraction and procurement strategies for the industry to consider.

Scottish Enterprise international sector head for oil and gas, David Rennie, said: “Decommissioning is highlighted as a key opportunity for the supply chain in Scotland’s oil & gas strategy.

“With an increasing number of assets approaching end of life, we recognise we need to ensure the supply chain is prepared to meet the challenges this presents.”