As the Autumn Statement is announced this week, Derek Leith, UK head of oil and gas taxation at EY, has taken up the role of Energy Voice’s guest editor. Follow along each day as he spells out the challenges and triumphs the industry faces.
A managing partner at EY in Aberdeen said in order to “radically" improve the cost base in the UKCS there would need to be a behaviour change within the oil and gas industry. Speaking after the event, Derek Leith said he had been surprised by findings from Energy Voice’s research which showed a ‘negative’ view of the industry. Leith was joined by a panel including Sir Ian Wood, Andrew Reid, chief executive of Douglas-Westwood, Rebecca Wain, a 24-year-old graduate geologist and Michael Engell-Jensen, co-chairman of Offshore Europe at the Energy Voice – Securing Our Future event at the Tivoli in Aberdeen.
Despite the oil price being slightly more stable over the past three months, it is still significantly lower than the highs seen over the past few years. There is still a great deal of uncertainty as to the future price and the UK oil and gas sector is facing the challenge of re-basing costs and improving efficiencies to make the UKCS viable at a $60 oil price.
Budget 2015: Guest Editor Derek Leith says the current slump provides the oil & gas sector with an opportunity to reinvent itself
Following the slide in oil price, which commenced in earnest in July 2014 and by 31 December had fallen by more than 40% in 6 months, alarm signals have been sounding loud and clear throughout the sector. Collectively industry drew a deep breath on the 1 January 2015 as it pondered what the year would bring. Could the price go lower than the $57 recorded on the 31 December and how soon would the price rebound? Well the answer to the first question has been yes, to just over $45 on January 13, and the answer to the second is anyone's guess but looks increasingly like a slow recovery with many predicting an average Brent price of $75 for 2016.