After the 'no' vote in the Scottish Referendum, attention now turns to the Wood Review and this December's Fiscal Review about how best to extract the remaining hydrocarbons from the UK North Sea.
A month after the people of Scotland elected to stay within the United Kingdom, the oil and gas industry is now shifting its attention away from political arguments and focusing on what is now to be done in the North Sea and the UK Continental Shelf in general. While the debate during the run up to the referendum on independence focused on how much oil and gas remained in the UK North Sea and how long meaningful production from the region could be sustained, now the focus is about implementing the recommendations made in the Wood Review – Sir Ian Wood's report on maximizing recovery on the UKCS.
It seems that the industry is on the same page as Sir Ian Wood, with oil and gas firms and the sector's advisors agreeing with the Wood Review recommendations. Meanwhile, they also want to see a positive Fiscal Review, expected to be announced by the UK government in December, which will encourage the industry to exploit the remaining hydrocarbons on the UKCS.
The Wood Review's Three Core Recommendations:
A new shared strategy for the UK for maximizing economic recovery, with commitment from the government and the oil and gas industry.
The creation of a new arm's length regulatory body that will oversee and develop a program of change and growth.
A greater collaboration in areas such as the development of regional hubs, sharing of infrastructure and reducing the complexity and delays in current legal and commercial processes.
In the immediate aftermath of the Scottish Referendum "no" vote, consultancy firm EY noted that because oil and gas was a "key battleground" in the independence debate it would seem "inconceivable" that the fate of the basin would slip down the political agenda.
Colin Pearson, a partner at EY's Aberdeen office, commented: "For the oil and gas industry to flourish, the findings of the Wood Review should be implemented as soon as possible and the impetus that has been created by the ongoing oil and gas fiscal review embraced."
Not long afterwards, at the end of September, Oil & Gas UK called for greater collaboration across industry and government. Publishing its Economic Report 2014, the industry organization pointed out that there are (possibly) still as many as 24 billion barrels left offshore on the UKCS but that radical fiscal and regulatory reform are "urgently needed" to maximize recovery of these hydrocarbons. Meanwhile, Oil & Gas UK said the industry "needs to act immediately" to address its unsustainably high, and rising, costs.
Oil & Gas UK Chief Executive Malcolm Webb said:
"Full implementation of Sir Ian Wood's recommendations for regulatory reform, and 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."
Oil & Gas UK Economics Director Michael Tholen added that the Fiscal Review "must be relevant, radical and robust" in order to deliver "a lighter tax burden, a simpler and more predictable system of field allowances and fiscal support for exploration".
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