Wednesday 12 February 2003

UKOOA President champions change to allow North Sea Independents to flourish

The UK oil and gas sector needs to change significantly if the new breed of independent operator now moving in to take advantage of Britains offshore reserves is to flourish, chief executive of Venture Production plc Bruce Dingwall warned today (12 February 2003).

Speaking at the UK Offshore Operators Associations (UKOOA) Energy Breakfast in Aberdeen, Bruce Dingwall, the Associations current president, underlined the increasing importance of independent oil companies, working alongside the majors, in exploiting the UKs remaining opportunities but warned of the hurdles they still encounter when doing business in the North Sea.

The high cost of capital, the additional financial burden of having to provide security to cover eventual decommissioning costs and the difficulty in finding the right staff are just some of the challenges facing new entrants building up their portfolios, said Mr Dingwall. Of more general concern is the complex web of commercial interests in the North Sea which can cause costly and time-consuming delays in making and carrying out investment decisions. Simplifying asset ownership can go a long way to making business in the UKCS more effective and efficient, he claimed.

Drawing comparisons with the Gulf of Mexico in 1968, Bruce Dingwall maintained there is still all to play for in the UKCS.

Remaining UK reserves are estimated in the range of 24 to 32 billion barrels of oil equivalent (boe), while the average discovery size is relatively small at 25 to 30 million boe, he said. Small fields are important to the independents. While the majors need to find 6.5 billion barrels per annum to replace production, UK independents can double their business by finding 130 million barrels on an annual basis.

There is a clear role for small and medium sized companies in helping to maximise economic recovery of UK reserves but for them to play their full part, the North Sea business model will need to change, he added.

The new-style operator is leaner, more aggressive and willing to work on tighter margins requiring adjustment not just within the existing operator community but also the supply chain. The new breed of operator requires a different relationship from its suppliers, which will provide opportunities for small and medium contracting and supply companies to develop and grow, he said.

Mr Dingwall acknowledged the changes already taking place in the North Sea through the work of PILOT, the government/industry initiative to improve UKCS competitiveness, and particularly the progressing partnership project which aims to shift behaviour and promote a greater spirit of openness across the sector.

Notes to Editors

1. The UK Offshore Operators Association (UKOOA) is the representative organisation for the UK offshore oil and gas exploration and production industry. It has 28 members. Visit www.oilandgas.org.uk for further information.

2. The UKOOA Energy Breakfasts are well established as an information and networking opportunity for the oil and gas industries in Aberdeen, regularly attracting around 400 people. They are sponsored by the Royal Bank of Scotland plc.

For more information, please call 020 7802 2400.