Capital investment in the North Sea is likely to have peaked in 2014 after four successive years of record levels of investment, while production appears to be approaching a turning point, with the latest data indicating that production in April increased by almost 10% compared to the same month last year.
Over the long-term there remain considerable opportunities to extend production, with up to 23 billion recoverable barrels of oil equivalent remaining in the North Sea – equating to about 25 years of work in the sector.
These are two of the key findings in the latest Scottish Government Oil and Gas Bulletin.
Maximising this potential, will require further measures to reduce industry costs, as well as targeted changes to tax and regulation.
The Bulletin highlights that high levels of investment and the current oil price have resulted in revenues declining. Looking forward, the industry’s central forecast is for production to increase by approximately 17% between 2014 and 2019 and the bulletin presents a range of scenarios for Scottish North Sea Tax revenues and demonstrates the positive impact increased production and improved cost efficiencies could have over this period.
The bulletin also highlights the total value of the Oil and Gas sector, which supports around 200,000 jobs across Scotland and now has a supply chain with international sales of more than £11 billion.
Scotland’s Deputy First Minster John Swinney commented: “There is no disputing that the industry has faced a very challenging year and we continue to work relentlessly to safeguard jobs and retain vital skills.
“These figures show that considerable opportunities to extend production remain in the UKCS and that, properly supported, the industry can boost production over the next five years. Indeed, over the longer term, the full and swift implementation of the Wood Review’s recommendations could help to bring 3-4 billion barrel of oil equivalent of reserves into production over the next 20 years.
“We believe it is important that we have stronger fiscal incentives to support exploration – in fact, only last week the First Minister addressed industry and called on the UK Government for additional measures to promote stability and incentivise investment and exploration. This could include the implementation of a new exploration tax credit, or by expanding the scope of the investment allowance.
“It is not acceptable for the UK Government to sit back and accept low revenues. Both <Holyrood and Westminster> governments and the industry must continue to work together to improve efficiency, production and deliver better results for the North Sea.