That the UK offshore oil and gas industry is fighting for its future is surely no over-statement.
The plummeting oil price and resulting cuts to individual oil and gas company budgets and jobs have featured all too often in the news over the last 18 months.
Our 2016 Activity Survey, launched today, brings together all those companies’ individual stories. It reflects the huge strides being made by the industry in improving efficiency and cutting cost to restore competitiveness.
But it also illustrates that this alone will not be enough to secure an enduring future.
The report proves that well-targeted exploration for, and healthy investment over the last few years in, the UK’s oil and gas does pay off, with a ten per cent production increase in 2015, a steady increase in exploration success and improved asset reliability.
But it also illustrates how keenly the UK Continental Shelf has been affected by the falling oil price.
Despite cutting unit operating costs by one third between 2014 and 2015, less than £1 billion of investment in new projects will be approved this year compared with a typical £8 billion per year over the last five years and exploration drilling remains at an all-time low.
With new projects offshore comes economic activity including employment and production; without those projects, well, take a look at those news stories.
Further improvement on costs is anticipated this year but with $400 billion cut from oil and gas company budgets globally, it will still be difficult to for the UKCS to get to the front of the queue for capital.
We need to work with Government to prevent the loss of expertise and supply chain capacity during this downturn and help secure our future.
That help must include a significant, permanent reduction in the headline rates of tax (which in any case is consistent with HM Treasury’s plans for fiscal reform), measures to promote exploration and unlock asset trading as well as improvements to the Investment Allowance.
We must, together, transform the UKCS into a highly competitive, low tax, high activity that sustains and supports the world-class supply chain.
The estimated 20 billion barrels of oil and gas, hundreds of thousands of highly skilled jobs and billions of pounds of exports and tax revenues are too great a prize to contemplate foregoing.
Mike Tholen is economics director for Oil and Gas UK