Fresh fears for North Sea as search for oil hits a new low

The search for oil has hit a new low. Picture: TSPL

And the industry is facing fresh challenges with the search for new fields having sunk to a “record low” and a lack of new investment, the Oil and Gas UK economic report for 2016 says.

But the amount of oil and gas being pumped out of the north sea is up for the first time in 15 years as the cost of getting it out of the sea fell by 45%.

The head of industry body Oil and Gas UK has now issued a plea for Government to champion the flagship industry which is suffering one of its most acute crisis since oil started flowing in the

Chief executive Deirdre Michie said the North Sea is now “in urgent need of fresh investment to boost exploration and drive activity, particularly for the supply chain.”

She added: “Exploration has fallen to record lows and little new investment has been approved in 2016 and 2017 looks no better.

“In light of this I am calling on governments today to vigorously champion the UK’s oil and gas industry, by providing certainty in our fiscal regime, encouraging new entrants to the market and recognising our supply chain as vitally important to the economy.”

She added that some operators could sell up fields which have limited amounts of oil left in order to free up cash for future investment.

The “supply chain” which provides a broad range of services to the North Sea giants, has seen an average 30 per cent fall in revenues since 2014 and ongoing job losses. The report says about 120,000 jobs, largely in the North-east of Scotland, are expected to have been lost over the past two years, which is described as “ the personal cost to individuals and families across the UK.”

The industry has undergone a massive cost-cutting exercise over the past 18 months, as jobs go and wages reduce, which has seen the cost of extracting a barrel of oil or gas from the UK Continental Shelf (UKCS) fall by nearly half and a 10 per cent increase in production.

Ms Michie added: “The evidence in the report demonstrates what our industry can achieve when the basin’s competitiveness is addressed and the tax regime reformed. Now it is time for the UK and Scottish governments to reinforce their efforts to promote the UKCS, nationally and internationally, as an attractive investment with world leading capability from front end exploration to late life operations.”

Scotland Office minister Andrew Dunlop today insisted that the UK Government is committed to supporting the oil and gas industry.

“In the last two years we have put in place tax breaks worth £2.3 billion, strengthening the North Sea’s appeal to international investors as a global centre of excellence,” he said.

“While the industry is adapting to this new business environment, there are opportunities that can be seized.”

Scottish Government energy minister Paul Wheelhouse said: “Measures are urgently needed to give operators the confidence to continue investing in the North Sea, and the UK government must consider what further fiscal and non-fiscal measures could be implemented to support the sector.”

He said Scotish ministers have set up a jobs taskforce and provided £24.5 million in support measures.