Quicker change is needed to sustain North Sea oil industry

ON November 5, we expressed our hope that the Autumn Statement would not be a damp squib for the oil and gas industry.

Having mulled it over for a few days, it feels like we didn’t get the fireworks out of the box at all. Anticipation was greater than usual from the country’s oil and gas industry around this year’s Autumn Statement.

If we set falling oil prices alongside increasing costs, reduced exploration, reduced investment forecasts then we have a concerning outlook. Our latest industry survey found confidence at a six-year low.

On tax, operators had told us that the fiscal regime in the North Sea is unpredictable, unnecessarily complex and simply too burdensome. The simple solution was to reduce the headline rate of tax and simplify allowances immediately and put in place firmer steps to address industry concerns. We expected a statement, we got an announcement.

What was given by George Osborne and Danny Alexander was ultimately lacklustre.

There was some decent stuff and it is going in the right direc- tion, however as a politician might say, the changes should be “faster and deeper” – currently they lack detail and clear momentum.

I truly hope we do not look back at this short period of time as a large opportunity missed. I fear we may, as highlighted by further job cuts announced over the weekend.

One positive fact is that the industry is relatively clear on what it needs to do. Increasing collaboration and reducing costs will be hard on the industry. To achieve these changes, cultural and behavioural changes need to be adopted.

However, I believe there is a will to achieve change even though it might not immediately be clear who the industry change agents are. What is clear is that the road to decommissioning is a one-way street, and once we start cutting down platforms and lifting pipelines, there is no way back. They cannot miraculously reappear.

The UK Government itself estimates that there are between 15 and 16.5billion barrels of oil still to be recovered from the North Sea and, as emphasised by Sir Ian Wood in his review of the area, we should be doing our best to maximise its economic recovery.

This may be the last chance for action before companies abandon wells, remove infrastructure and leave the UKCS for good.