Deloitte: Positive Prospects for UK North Sea in 2013
A report released Friday from accountancy firm Deloitte stated that a range of key indicators suggest positive prospects for the oil and gas sector in 2013, following tax breaks introduced last year by the UK government to stimulate activity in the North Sea.
The report, compiled by Deloitte's petroleum services group (PSG), said that a broader range of tax allowances and a sustained high oil price boosted drilling activity on the UK Continental Shelf (UKCS) by one third in 2012. It also showed that 65 exploration and appraisal wells were drilled on the UKCS in 2012, marking a 33-percent increase on last year's total of 49. This compares to lower drilling activity levels reported in Norway in 2012, down by 19 percent when compared to the previous year.
2012 also saw a surge in deal activity in the oil and gas sector. Across North West Europe, 129 deals were announced, 80 of which took place in the UK. This equates to a 30-percent increase on the UK's 2011 deal figure, said Deloitte.
These deals were split almost equally between farm-ins – companies taking a stake in another company’s field – and deals to purchase oil and gas fields, at 40 percent and 43 percent respectively. 64 percent of all deals in 2011 were farm-ins and deals to purchase fields only represented 14 percent. The fact that companies are buying more fields outright is another indicator of rising investor confidence, added Deloitte.
Interest in field development also reached a 10-year high. The Department of Energy and Climate Change (DECC) granted 21 field development approvals, and eight incremental projects – investment in older fields for redevelopment - were sanctioned. Last year was also the fourth consecutive year in which steady growth in field development approvals was reported.
Deloitte Managing Director PSG Graham Sadler commented in a statement:
"After several years of caution and uncertainty, we have a more positive environment, where a number of factors such as tax incentives, high oil price and appetite to invest have combined to make 2012 the most encouraging year for a long time.
"The government introduced a range of tax reliefs which have sufficient breadth and depth to create an environment in which companies of all sizes and investors have the confidence to take some risk and expand their operations in the North Sea.”
Deloitte added that the final quarter of 2012 turned in the strongest performance of the year, with 29 percent of new wells drilled between October and December.
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