Oil and gas bosses made a fresh call last night for new tax incentives amid growing fears that a lack of investment will leave billions of pounds worth of oil underneath the sea.
Oil and Gas UK is appealing for aid after new figures revealed just nine new oil wells were drilled on the UK Continental Shelf in the first six months of 2009 – less than a third of the 30 wells opened up over the same period last year.
The industry body made an impassioned plea to Chancellor Alistair Darling earlier this year, urging him to give tax breaks to firms for exploration to free up cash for investment.
It has now repeated that call in the wake of the new figures from the UK Government – this time warning that jobs and the national energy supply could be at risk if he doesn’t. Exploration – the drilling of new wells in search of oil – is regarded as the lifeblood of the industry.
A buoyant second quarter of 2008 saw 17 such wells opened up. However, just six new wells have been worked on in the second quarter of 2009, according to the statistics.
Appraisals – the process of determining how much is in a well that is known to contain oil – have halved, from 16 in Q2 2008 to just eight this year.
And a 16% rise in developments – production wells drilled after development approval has been granted – has been overshadowed by the 70% drop in exploration.
Mike Tholen, Oil and Gas UK’s economics director, said a vast fortune could be left below the North Sea unless companies are encouraged to start spending on drilling again.
He said: “If we are to maximise recovery of the UK’s oil and gas, which will be required if we are to secure an affordable energy supply in years to come, the government must take steps to encourage exploration on the UKCS. If it does not, valuable barrels of oil and gas will be left in the ground to the detriment of the UK’s security of energy supply, tax revenues, employment and balance of payments.”
Andrew Reid, Aberdeen-based managing director of energy consultancy Douglas-Westwood, has already warned it could be 2010 before the industry rediscovers its appetite to unearth new supplies.
Last week, Ronnie MacGregor, a director of Baker Hughes UK and chairman of the Well Services Contractors Association (WSCA), said the volatile price of oil has left confidence in the industry low.
Speaking after the WSCA released its Business, Investment and Confidence Report 2009 report, he said: “We have seen a dramatic reversal in the fortunes of our sector in the last year when we were anticipating a buoyant future. With the decline in the oil price to below $40 (£25) a barrel by the end of 2008 and the credit crunch preventing smaller operators accessing development capital, activity and confidence levels have fallen dramatically.”