The Treasury’s plan to reform the oil and gas fiscal regime is an interesting and encouraging document, which recognises the importance of the industry, while at the same time acknowledging the need to be more competitive in attracting and promoting capital investment in the UKCS. It has the hallmarks of collaboration, with the Treasury accepting that they must adjust their thinking as to tax receipts from the UKCS, and it is the first time in recent memory, committed to black and white, that ‘we are all in this together’. The Treasury does not publish a document of this importance without it having being very carefully vetted.
It looks as if the UK Treasury has a fiscal plan that might work for the UK Continental Shelf and the industry appears broadly receptive. But there were multiple warnings issued to Treasury chief secretary Danny Alexander in Aberdeen that time is running out and that he must deliver concrete measures by the Government’s Spring Budget. Indeed, this urgency is made all the more acute by the revelations that Opec swing producer Saudi Arabia is now apparently content to let the oil price drop to around $60 a barrel and that it be a long, rough ride for everyone. The gathering of industry leaders and media at Oil & Gas UK’s offices to listen to Alexander and Tory colleague Priti Patel (exchequer secretary) was large.
There are three things wrong with the UK Parliament's approach to the oil industry. Firstly, there is no gratitude whatsoever. Over the last 40 years more than £330,000million has poured into the Westminster Exchequer, around £60,000 per head for every Scot. Scotland's resources have bankrolled successive Tory and Labour Chancellors. They present any crumb of a concession as if it were a gift.
The UK Government has unveiled a radical plan aimed at rewarding investment in the North Sea in a bid to see as much oil and gas extracted as possible. A review of the fiscal regime for the oil and gas sector was announced in this year’s Budget, with a new Treasury report saying “significant change” was needed in order to continue to attract investment. Chief Secretary to the Treasury Danny Alexander launched the new report as he met key industry figures during a visit to Aberdeen. There is still “significant hydrocarbon reserve” in the UK Continental Shelf (UKCS), the Government said, which could “generate significant benefits for the UK” if it can be recovered.
The head of oil and gas for professional services firm EY said the government has taken a "crucial step" towards protecting the longevity of the UK's oil and gas industry. Derek Leith said the recommendations were also in line with what had been set out in the Wood Review. The Chief Secretary to the Treasury, Danny Alexander, was in Aberdeen to outline three principles which will underline the future of oil and gas fiscal policy, as well as a new set of proposals. Mr Leith's comments come after he spoke to Energy Voice yesterday to give his initial reaction to the Chancellor's Autumn Statement.
Offshore firms will be offered new tax breaks today to trigger a fresh wave of North Sea exploration, it can be revealed. Energy Voice has learned that Chief Treasury Secretary Danny Alexander will reveal plans to try to end the UK's exploration crisis through a system of tax credits for seismic surveys. The move is expected to be welcomed by industry leaders who have repeatedly called for extra incentives to stimulate flagging exploration rates.
The head of oil and gas for professional services firm EY said the Chancellor's announcement could prove to be a "turning point" for exploration and production in the North Sea. In an interview with Energy Voice, Derek Leith said the initial steps taken may receive a mixed review from the industry. Further announcements are expected tomorrow, in Aberdeen, by the Chief Secretary to the Treasury, Danny Alexander.
Eyebrows were raised after it emerged that the incoming chairman of the new oil and gas regulator would enjoy a £100,000 pay packet for a job that requires just 2.5 days a week work. The Oil and Gas Authority (OGA), formed on the recommendation of the Wood Review, is on the hunt for a chairman or woman after it recruited former BG Group boss Andy Samuel as its new chief executive. Mr Samuel, who takes up his new job on January 1, will be paid £250,000 per year.
Lord Smith of Kelvin, chair of the Smith Commission on Scottish Devolution, will appear before Holyrood’s newly-convened Devolution (Further Powers) Committee. His report recommended the UK government would remain in charge of licensing for all offshore oil and gas extraction under the proposals but Holyrood could get the power to determine if fracking goes ahead in Scotland.
Hopes have been raised that an innovative renewable energy scheme harnessing the tides could get the go-ahead, after the Government announced it was starting in-depth discussions on the project. The Treasury has announced it will start closer discussions with Tidal Lagoon Power Ltd, the company which is aiming to build the world’s first tidal lagoon power plant in Swansea Bay, to see if it is affordable and value for money for consumers. The developers of the £750-850 million project have said their application is the first step to developing lagoon technology that could meet 10% of the UK’s electricity needs from the tides.
The decline in oil prices could have a substantial adverse effect on the oil and gas industry in the UKCS (UK continental shelf) a leading industry expert has warned. Research by Professor Alex Kemp and Linda Stephen from the Aberdeen University has found that if the current drop in price continues, there will be reduced investment and production. Using economic modelling, the pair highlighted two scenarios which reflect investment screening prices.
Last month at PETEX in London, the hunt for shale gas resources in the UK was a hot topic and among the companies offering their expertise and wares at the show was CGG, currently being stalked by fellow French group Technip, and US energy services giant Baker Hughes, which arch rival Halliburton ha made a $35billion bid for. While companies such as these cannot easily answer the social and political questions, or indeed even wish to engage that way, they can contribute to the debate on technical feasibility and potential. And both Baker and CGG are well equipped to do this. Firstly, and according to CGG, we in Europe and not just the UK have the opportunity to benefit from the latest developments in North America. Integrated workflows, which bring together a broad range of geoscience data, have shown great potential for the comprehensive reservoir characterisation required to optimise drilling and completion activities in heterogeneous unconventional resource plays.
I don’t particularly like Boris Johnson and I certainly don’t support his politics. I also resent his constant lobbying for London which, incidentally, I don’t really like much either. The museums are great but you can keep the rest of it. I’m a country boy at heart. However, something Boris Johnson wrote last year I have to say I do agree with completely although I’d prefer you didn’t spread it around too much as it might damage my reputation. Commenting on what he called the UK’s “sterile debate” over Europe he said that if it culminated in our leaving the EU then it would quickly discover “that most of our problems are not caused by Brussels, but by chronic British short-termism, inadequate management, sloth, low skills and a culture of easy gratification and under-investment”.
The UK government has signed an agreement with Canada to work together on research and knowledge sharing for Carbon Capture and Storage (CCS). Both countries released a joint statement which identifies how they plan to work together and build on the work they have already undertaken. The use of CCS is viewed as one of the most cost effective technologies for decarbonisation of the UK’s power.
A leading oil and gas company has cancelled Christmas parties for thousands of workers – because bosses fear upsetting colleagues who are losing their jobs. Aker Solutions, which employs more than 2,000 people in Aberdeen, called a halt to its annual festive celebrations to show “sympathy” with hundreds of staff in Norway who have been affected by cutbacks. The company is shedding posts in Stavanger, Bergen, Alesund, Kristiansund and Trondheim, but not in Aberdeen. Staff based in the north-east were reported to be upset at the decision to ditch the festivities. The oil and gas services firm has gone all-out in recent years to celebrate the festive season, hiring specialist party planners to run a family fun day at Ardoe House Hotel.
Onshore explorer Europa Oil and Gas plans to begin production testing at its Wressle-1 well in North-East England. The company’s chairman Bill Adamson will announce development in its work at an annual general meeting today. Drilling of the Wressle well, which started in July, marked the launch of a programme focused on proving up a potential 39 mmboe (million barrels of oil equivalent) within Europa’s portfolio in Ireland, France and onshore UK.
The proposal from the Department of Energy and Climate Change (DECC) to establish a sovereign wealth fund based on future revenues from the extraction of shale gas, is, in principle a good idea. Many countries now have such a fund, turning current oil and gas revenues into a national asset for the long term. Norway's fund is most often quoted as an example; another lesser known example is the state of Texas in the US which has such a fund for its universities. The details of the proposal from DECC are yet to be released so its final shape and impact is unknown. Given the size of the UK economy, and our budget deficit, the idea that we can build a large financial fund of the type enjoyed by Norway is unrealistic. However, I would argue that there is still a great deal that could be done with a shale gas fund. Most sovereign wealth funds build financial capital taking revenues from the oil and gas industry and investing them in the stock exchange. I would propose DECC consider a fund for human capital, not financial capital.
The UK government has caused uncertainty with its ‘panicked, last minute’ referendum tactics, the chief executive of the UK Chamber of Shipping has claimed. Guy Platten will claim Scottish business has been left vulnerable by the methods used by the Better Together campaign to win the Scottish referendum two months ago. He describes the devo-max plans outlined by Westminster as being written on the ‘back of a fag packet’.
Most countries in Europe look on Norway with envy. As the UK and other European countries struggle with reducing public spending, Norway benefits from a sovereign wealth fund worth around £500 billion. It has wisely invested the income from its oil and gas reserves, with its fund considered by many to be the world’s largest.
The regulations imposed on shale gas fracking are “unnecessarily restrictive”, according to research by two University of Glasgow academics. In a new paper, Dr Rob Westaway and Professor Paul Younger from the School of Engineering, claim widely applying restrictions similar to those in force on fracking would require a ban on heavy vehicles from passing houses or walking on wooden floors. The report also states that the threat of serious earthquakes caused by fracking activity is considerably lower than commonly feared.
The Chief Secretary to the Treasury Danny Alexander said greater fiscal control over the oil and gas sector would not be “the right thing to do.” Mr Alexander said he welcomed the Smith Commission report next year, but said the oil and gas industry needed stability and certainty. He was speaking in Aberdeen on a visit to the headquarters of Archer, the global oilfield service company.
Petrol firms and supermarkets will be pressed by the Government to pass on the benefit of falling oil prices to customers filling up at the pumps. Treasury Chief Secretary Danny Alexander will demand an assurance from fuel companies and distributors that they are doing all they can to pass on the price cuts to motorists. Mr Alexander will use a speech in Aberdeen to warn people would "rightly be angry" if they felt prices were not coming down as much as they should.
The collapse of a deal for the oil refinery in Milford Haven is “very disappointing”, David Cameron has said. But the Prime Minister insisted ties should not be cut with Klesch Group, which is also in the process of buying Tata Steel’s long products division. Mr Cameron made the remarks in answer to Labour MP Tom Greatrex who highlighted concern about the Swiss-based firm’s intentions given its record of “asset stripping”.
A third UK refinery shutdown in five years will put hundreds of people out of work while making only a small dent in the estimated TWO million barrels a day of European capacity that must go by 2020. Murphy Oil Corp (MUR) will close the Milford Haven refinery in Wales after a sale to Klesch Group collapsed, ending a four-year search for a buyer and resulting in “significant” redundancies, the U.S. oil company said late yesterday.
UK Oil and Gas (UKOG) has submitted a bid for a 200km area covering the Southern part of the Isle of Wight as part of the UK 14th landward licence round. The company said its board had drawn the first $1million of a new $10million unsecured debt facility to submit its application.