North Sea oil risk reward ‘not attractive’

INVESTORS are turning away from the North Sea due to a lack of significant new reserves, according to the founder of a leading oil and gas exploration company.

Sir Bill Gammell weighing risks. Picture: Ian Rutherford

Sir Bill Gammell, who founded Edinburgh-based Cairn Energy, said the balance of potential rewards and risks for investors in the North Sea was “not attractive”.

Sir Bill, who is to stand down as company chairman after 25 years on the board, said he did not believe the North Sea was “disappearing” but argued a decline was evident in recent falls in production.

He told a newspaper this weekend: “If you think that North Sea production was down 35 per cent in the last three years, with only 15 exploration wells drilled in the last year, in terms of new exploration it’s not an area that people are putting much money into, because you’re not likely to find significant new reserves.

“The fiscal policy is hugely important wherever you are, but there’s been so many wells drilled in the North Sea, the chances are nothing major has been missed. Is the North Sea somewhere where the company is going to spend lots of new exploration dollars? No, because the risk reward is not attractive.”

The former Scotland international rugby player went on: “I don’t subscribe to the view that the North Sea is disappearing, but I do think that a 35 per cent decline over three years is telling us something.”

Sir Bill declined to follow the heads of Shell and BP in criticising an independent Scotland, adding: “What happens post-independence in the North Sea is an argument for the future. But it is not affecting our decisions today.”

Only 15 exploration wells were drilled in 2013, continuing a downward trend since 2008 when 44 were drilled, according to Oil & Gas UK.