The UK continental shelf (UKCS) is now benefitting from “record investment”, with more than £8 billion announced in the last six months alone.
A new report suggests oil and gas investment rose to £11.4 billion last year – believed to be the highest for more than thirty years – and is expected to rise even further to at least £13 billion this year.
The Oil and Gas UK 2013 Activity Survey also claims £44 billion of capital investment have already been approved and are under development and another £30 billion have a “better than 50% chance of approval” in the next few years. The sector also supported more than 440,000 jobs across the UK in 2012 alone.
Malcolm Webb, Oil & Gas UK’s Chief Executive said: “Here is some really good news for the UK. After two disappointing years brought about by tax uncertainty and consequent low investment, the UK continental shelf is now benefitting from record investment in new developments and in existing assets and infrastructure, the strongest for more than three decades.
“The recent introduction of targeted tax allowances to promote the development of a range of difficult projects, coupled with the Government’s ground-breaking commitment to provide certainty on decommissioning tax relief, has prompted global companies and independent businesses alike to take another look at the UK as an investment destination and resulted in a new wave of investment. It is crucial that we sustain this momentum in the years ahead.”
Oil and gas production in 2012 fell to 1.55 barrels of oil equivalent per day (boe/day), down by 14% from 2011 and 30% from 2010. This is believed to be due to the “damage” on investor confidence by the numerous tax changes in the mid-2000s.
However, the report claims although production may fall again slightly this year to 1.45-1.5 million boe/day, the recent increase in investment could mean production rise of around two million boe/day by 2017. In addition, the projects approved in 2011 and 2012 alone is expected to produce more than two billion barrels of oil and gas and generate £100 billion value for the economy and £25 billion in production taxes.
The report suggests 70% of British energy requirements are still likely to be met by oil and gas into the 2040s.
Scotland’s Energy Minister Fergus Ewing welcomed the news and said the report showed the “continued importance” of the North Sea within the energy world. He added: “The oil and gas sector is vitally important to Scotland’s economy and with more than half of the value of the North Sea’s oil and gas reserves yet to be extracted, up to 24 billion recoverable barrels with a potential wholesale value of £1.5 trillion, oil and gas will remain an enormous economic resource for decades to come.”