By DARA BUTTERFIELD
Oil & Gas UK has released its Economic Report 2014 with claims that the sector is finding it increasingly difficult to compete for investment internationally as unit operating costs are about 60 per cent higher than they were in 2011.
It has warned that it will require bold and purposeful action in all parts of the industry, and between government and industry, to redress the balance on costs. It warns that radical fiscal and regulatory reform are urgently needed to maximize the recovery of offshore oil and gas.
Oil & Gas UK’s chief executive Malcolm Webb said:
“Today this country depends on oil and gas for some 70 per cent of our primary energy needs and oil and gas from the UK offshore areas supply nearly 50 per cent of that. Our industry has a crucial role to play in the future well-being of this country.
“However, to support a lasting and sustainable future, today we’re calling for greater collaboration – between governments, between government and industry and within industry itself to face and fight the challenges ahead.
“Far-sighted changes to the fiscal regime, are needed in the next 12 to 18 months to stimulate new investment in exploration and production. Alongside this, the industry must improve its efficiency and reduce its costs as a matter of utmost urgency.”
Its economics director, Michael Tholen, adds:
“We need a lighter tax burden, a simpler and more predictable system of field allowances and fiscal support for exploration. The outcome of the Fiscal Review, expected to be announced in December this year, must be relevant, radical and robust.”
Production in the first half of 2014 has been good for the industry. After several years of double digit decline, DECC figures currently indicate a one per cent increase compared with the same period in 2013.