UK To Get Hands-On In Quest For Remaining North Sea Oil

An interim report from the government's review - chaired by industry veteran Ian Wood - estimated as much as 24 billion barrels of oil could still be produced, worth about $2.6 trillion at current prices.

But the oil is getting harder and more expensive to recover. And many of the firms with the skills to do so complain they can't get access to the infrastructure they need because it is owned by major oil companies that are focused elsewhere in the world and see little benefit from helping competitors.

High costs, including wages and taxes, are also making oil firms think twice about the North Sea. In November, for example, Chevron cast doubt over its Rosebank project in the region, estimated to have cost $8 billion, saying it did not currently offer "economic value".

There is also political uncertainty, with BP warning this month that the industry could face extra costs if Scotland votes for independence in a referendum in September.

No Easy Answers

The interim report from the Wood Review in November suggested the government should set up a stronger regulator for the industry to ensure companies work together in a way that "maximises economic recovery" of oil in British waters.

That could follow the model of Norway, where the NPD regulator is mandated both to drive cooperation between oil firms and to impose Norwegian law - which requires that resources are developed optimally.

The NPD, however, has been operating for around forty years and employs about 200 highly-skilled people with an in-depth knowledge of the North Sea, something which industry watchers say will not be easy to replicate in a short space of time.


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WHAT DO YOU THINK?


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Fraser Innes  |  February 20, 2014
The government has continued to turn the tax screw and is now reaping the rewards in every sense. The downturn in activity in the UKCS is forcing the whole food chain of oil and gas companies to look elsewhere rather than on their doorstep. I had to laugh at the final paragraph; "The government might have to act as a broker in any such deals, possibly taking stakes in the resulting businesses. That would be a big bet given the price of oil has fluctuated from as low as $10 to as high as $147 a barrel over the past 20 years." They bet hugely on the banks I seem to remember and as the oil and gas industry, as a whole, bets on the future of the industry every day why wouldnt the government? The cash cow needs to be fed finally! That is all


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