Wednesday 28 May 2008

OIL & GAS UK MEETS PRIME MINISTER TO DISCUSS BOOSTING INVESTMENT IN UK OIL AND GAS

Prime Minister Gordon Brown and the Chancellor of the Exchequer Alistair Darling met members of the Board of industry association Oil & Gas UK in Aberdeen today (28 May) to discuss the supply demand balance in world oil markets and the role the UK, as a still significant oil and gas producer, can play to ease the problem.  

Senior managers from 18 leading companies from across the offshore sector explored possible measures to bring forward new oil and gas developments in the UK continental shelf and enhance the recovery from existing fields.

Malcolm Webb, chief executive of Oil & Gas UK, said:  "This was a highly constructive engagement and the proposals discussed could have a significant impact on the near term production.  We look forward to continuing our discussions with Government to develop these ideas."

Oil & Gas UK also welcomed the announcement today by BERR of the approval of the West Don and the Don South West developments which it is estimated will deliver an additional 50,000 barrels of oil a day at their peak.  The agreed changes to petroleum revenue tax will provide further stimulation for future investment and will potentially affect 30 fields.

Ends

NOTES TO EDITORS

1. Oil & Gas UK is the leading representative organisation for the UK offshore oil and gas industry.  Its members are companies licensed by the Government to explore for and produce oil and gas in UK waters and those who form any part of the industry's supply chain.  It has 67 members.
2. Oil and gas production in 2007 was 2.8 million barrels of oil and gas equivalent per day (boepd). From 2006-7, gas production declined by 10%; oil production was stable.
3. Although large sums have been invested recently (about £5-6 billion in recent years) in bringing new developments into production, severe cost inflation has reduced the efficiency of this capital (capital efficiency is a third of what it was five years ago).
4. Indicative of loss of competitiveness of UKCS projects was ~£1 billion drop in investment in 2007 to £4.9 billion, with the fall masked by cost inflation.
5. Oil and gas production has responded to increased investment less than expected and is forecast to decline by 4-5% a year out to 2010.
6. 37 billion barrels of oil and gas have been recovered from the North Sea and it is estimated that there are up to 25 billion barrels remaining.
7. It is estimated around £30 billion investment is needed over the next ten years alone to recover the oil and gas planned, but £17 billion of this has not yet been secured.
8. Measures to improve the competitiveness of marginal UK projects are needed to ensure international investors' capital is attracted to the UKCS and that recovery is maximised.

Sally Fraser

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