Tuesday 20 September 2005

Don't Overlook Significance of UK Offshore Oil and Gas Industry, Says UKOOA Chief Executive

With crude oil and natural gas prices continuing to dominate the headlines amid calls for additional investment in global oil production and refining capacity, UK oil and gas producers are playing their part and investing hard in the mature North Sea to maximise recovery of the country's reserves, estimated to be up to 28 billion barrels.  But the industry's efforts to stem the rate of UK production decline would be derailed by further tax hits, poor regulation and escalating costs.

This will be the message delivered by Malcolm Webb, chief executive of the industry trade body, the UK Offshore Operators Association, at a fringe meeting tonight at the Liberal Democrat Party Conference (19 September). 

He will say:  "Last week the Chancellor called for additional investment in oil production.  UK oil and gas producers are already doing just that.  Exploration of the UK continental shelf for new fields is up this year as is the number of new production wells drilled to date.  The industry invested over £8 billion last year.  This year, we expect that figure to rise by as much as 25 percent to £10 billion.

"The industry's efforts to stem the rate of UK production decline are paying off and current investment plans will see the rate halved to 7 percent per annum.  This means we expect UK fields to be producing for decades to come, and in 2020 should still be meeting 65 percent of all our oil needs and a quarter of our gas needs. 

"If we don't produce it, we will have to import it.  Producing our own oil and gas saves this country £30 billion on its balance of trade and will generate more than £10 billion in tax for the Treasury, more than double the amount paid last year.  Not only does it provide a secure source of primary energy, but is also supports over a quarter of a million jobs across the UK.

"This industry has invested a total of over £330 billion since the first exploration licenses were issued more than 40 years ago.  It has recovered 34 billion barrels of oil and gas from Britain's often hostile offshore environment, risking not one penny of taxpayers' money but, on the contrary, earning this country more than £200 billion in tax revenues in total.  Furthermore, UK gas fields have supported the expansion of direct gas usage and gas fired power stations in the UK which have been the major contributor to the UK meeting its Kyoto targets.

"The next chapter in the industry's history is now being developed on the already considerable presence of UK expertise, goods and services in the world energy market, which can continue to grow and create wealth for many decades yet to come.  

"We should therefore be doing everything possible to build on and sustain one of the UK's most remarkable post-war industrial success stories.  The country's reliance on oil and gas is growing, and government forecasts suggest that by 2020, 85 percent of our primary energy needs will be met by these resources. 

"Yet I fear that we are still in danger of overlooking the significance of this great UK industry, which must not be put at risk from poor regulation, escalating costs and further tax hits.  These would undermine investor confidence and erode international competitiveness, the very factors that will determine how long we can continue to produce economically from the North Sea. 

"Oil companies sustaining high levels of investment in production is only one side of the coin.  The other side is for government policy makers to work with industry to create the right business climate that will support UK oil and gas production in the long term."

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