Boom year for oil and gas sector shines bright ray of light on 2013

Investment increases for UK interests in the North Sea should boost the industry this year
Investment increases for UK interests in the North Sea should boost the industry this year
Share this article
Have your say

HIGH oil prices and the introduction of North Sea tax breaks led to bumper investment in UK waters last year, fuelling hopes of a strong 2013 for the industry.

An annual review published today by Deloitte’s petroleum services group shows 65 exploration and appraisal wells were drilled on the UK Continental Shelf (UKCS) in 2012, a 33 per cent hike on the previous year’s total of 49.

The UK government also granted 21 field development approvals, the highest for ten years. A further eight “incremental projects” – investment in older fields for redevelopment – were given the green light.

The report said an increasing number of purchasers buying fields outright was also a sign of confidence.

Graham Sadler, managing director of the Deloitte group, said a number of factors were driving strong growth in the UKCS region with indications of positive prospects for the sector continuing into 2013.

“After several years of caution and uncertainty, we have a more positive environment, where a number of factors such as tax incentives, high oil price and appetite to invest have combined to make 2012 the most encouraging year for a long time.”

He said the introduction of a number of tax reliefs meant companies and investors had the confidence to “take some risk and expand their operations”.

Last year the Chancellor announced an increase in the allowances for small field development and introduced a new tax break for large deep-water developments targeting West of Shetland.

Derek Henderson, energy partner for Deloitte in Aberdeen, said: “North Sea oil and gas production may have passed its previous zenith, but in the recently announced tax reliefs the UK government has what appears to be a useful strategy to manage the decline in North Sea’s reserves.”

The growth in UK activity compared to lower drilling levels reported in Norway in 2012, down by 19 per cent

A separate report from Edinburgh-based consultancy Wood Mackenzie yesterday revealed 2012 had been a record year for global merger and acquisition (M&A) activity in the oil and gas sector with some $232 billion (£145bn) worth of deals.

The year was dominated by three major transactions in the second half of the year involving Rosneft/TNK-BP, CNOOC/Nexen and Freeport/Plains.

Last year, also saw a surge in deal activity across north west Europe with 129 deals announced, 80 of which took place in the UK – up 30 per cent on 2011.

Meanwhile, oil services firm Wood Group yesterday announced it had won a $50 million (£31.2m) contract from Nexen Petroleum to carry out work on the Golden Eagle field development in the North Sea.

The Aberdeen-based group said its PSN subsidiary, which employs more than 8,000 people across the UK, will be responsible for hooking up and commissioning offshore facilities for the field, situated about 70 miles north-east of Aberdeen, with first production expected late next year.

About 100 people will work on the two-year project, which will be developed using two platforms connected by a 70-metre bridge.

Wood Group PSN managing director Dave Stewart said the firm has a long history of working with Nexen, having previously delivered services for the Buzzard platform. Shares in Wood Group closed up 1.5p at 804.5p.