Tax relief needed to help North Sea

Oil industry veteran Sir Ian Wood has said it is completely wrong to think that the North Sea oil industry is finished, and predicted it will return to strong activity within the next five years.

Sir Ian – former chief executive of the Wood Group who has advised the UK Government on maximising oil recovery – said nearly a third of the North Sea’s oil has still to be extracted.

He acknowledged that the current downturn “is probably as tough as it gets”, after Oil and Gas UK warned the industry stood “at the edge of a chasm”.

He said it is “a very serious time” with oil prices hovering around $30 dollars a barrel, 43% of fields operating below cost level and few signs of investment or exploration.

Sir Ian echoed OGUK’s call for urgent tax reform, insisting Chancellor George Osborne must adjust taxes to reflect the maturity of the North Sea.

However, he predicted a longer-term return to $55 to $60 dollar oil, and called on the Oil and Gas Authority to work to prevent another “boom and bust”.

“There’s a huge prize out there and it’s quite wrong to think that the North Sea is finished,” Sir Ian said.

“That is just completely wrong. The North Sea will recover.

“I’m prepared to guarantee in the next four or five years we won’t perhaps be back to where we were but we will be back to a pretty active, strong industry with a lot of prospects ahead of it.

“We need to think and plan towards that.

“I think it will take $60 to $70 dollar-abarrel oil, a fiscal regime determined to maximise recovery from the North Sea, a very active OGA and industry keeping its cost base down to the kind of $15 to $17 dollar-a-barrel operating cost level.”

He predicted more firms will be depending on the banks to keep going over the next year after First Oil’s administration on Monday.

Sir Ian Wood: predicts North Sea will return to strong activity.