Each time a report or study is published on maximising the UKCS potential and securing a stronger, higher oil price in the future we see one glaring similarity: the importance of increased productivity.
Future production in this industry will rely heavily on how much exploration is able to take place over the coming decades, but the support for that must be put in place now. Encouraging operators to explore the North Sea with confidence requires efforts from everyone with an invested interest in sustained production, and that includes Governments and politicians.
We also need to ensure that assets are in the hands of the companies that are best placed to develop them effectively. This is particularly key in late life assets, which is why I and the SNP support the calls from Oil and Gas UK for decommissioning relief to be transferred to new entrants. If that is brought in we will see new entrants with the technology, expertise and finance to extend production and delay decommissioning.
Next week the Chancellor will make this budget announcement and once again he has the opportunity to give considerable support to the North Sea by putting in place loan guarantees for critical offshore infrastructure. For an industry that has paid tens of billions of pounds into the Treasury over the years, at this difficult time of downturn the UK Government should have the decency and confidence in it to provide some support to ensure a strong future can continue.
The University of Aberdeen’s research states clearly that oil and gas price increases combined with further productivity improvements will make a major difference to the economic recovery of the UKCS. Complex financial simulation modelling is proving what myself and the SNP have been saying for months in regard to productivity boosts, and the Chancellor must pay attention to that.
Now, one of the best pieces of advice I have been given is not to try and be the person who predicts the oil price, but even in the best case scenario of that increasing day-by-day, we still have to accept that it is only one half of the solution this report is suggesting. The other, productivity, will only happen through further exploration and that is as important to the future of the North Sea as the oil price itself. Another failure to announce incentives for exploration of UKCS in the Budget would prove the Tories are covering their eyes and ears and choosing not to listen to industry.
Looking ahead of course there are many factors that will contribute to the future successes of the North Sea that we may not even know about yet; we cannot necessarily predict what innovations will appear over the coming years, but we can prepare for how we react to them. Since the downturn in oil price we have seen how the joint efforts of businesses across the oil and gas industry has resulted in the cost of production being significantly reduced as companies genuinely work in partnership and in each other’s best interests. Unfortunately the response from the UK Government has been far less inspiring as time and time again when they have the opportunity to make a significant and radical difference to exploration and production, they do the bare minimum instead.