Wood Review: UK, Scottish Governments Discuss Future of Oil, Gas Sector
UK and Scottish government ministers met in separate cabinet meetings Monday to discuss the future of the North Sea oil and gas industry following the publication of Sir Ian Wood's final report on maximizing recovery on the UK Continental Shelf.
The UK Department of Energy and Climate Change commissioned former Wood Group Chief Executive Sir Ian Wood to conduct a review of UK offshore oil and gas recovery and its regulation in June 2013. The final report, published Monday, set out 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.
Ahead of a referendum on Scottish independence scheduled for mid-September this year, UK Prime Minister David Cameron chose Monday to move his cabinet session away from its usual location at No.10 Downing Street to Aberdeen, Scotland in order to discuss Sir Ian Wood's recommendations. Meanwhile, the pro-independence Scottish Nationalist Party-dominated Scottish government is holding its own cabinet meeting just outside Aberdeen.
Westminster and Edinburgh politicians know that Scottish voters' perceptions about the future of the North Sea oil and gas industry is set to play an important part in their decisions to vote 'yes' or 'no' in the forthcoming referendum.
The Scottish government believes that North Sea oil has been "squandered" by successive Westminster governments and that a 'yes' vote for Scottish independence would mean a better future for the North Sea industry, while it would give Scotland the opportunity to establish a Norwegian-style sovereign wealth fund for the country. But UK PM David Cameron argues that "the broad shoulders" of the UK government are required to support investment in the industry.
According to the Wood Review, 42 billion barrels of oil equivalent have already been produced on the UKCS, while between 12 and 24 billion barrels more could still be produced by conventional means. The UK government has accepted Sir Ian Wood's recommendations, which it pointed out could result in a boost to the UK economy of $330 billion (GBP 200 billion) through additional production.
Industry body Oil & Gas UK also welcomed Sir Ian Wood's final report, with Chief Executive Malcolm Webb describing it as a "game changer".
Webb commented in a statement:
"The UKCS still has significant oil and gas recovery potential, with up to an estimated 24 billion barrels of oil equivalent (boe) to be found, developed and produced offshore. However, realizing this potential will not be without its challenges, as the results of our Activity Survey to be published later this week will make clear.
"Underlying the current record investment and high activity is a more complex picture. The number of fields in operation has climbed from 90 to over 300 since the 1990s, new discoveries are typically small, production is falling, costs are climbing, and exploration is at an all-time low."
Webb added that Oil & Gas UK strongly welcomes the proposal for a new arm's length regulator with additional powers and resources.
"We see this as the necessary catalyst for change, ensuring that the stewardship of the country's oil and gas resource is taken to a new level. The new tripartite approach is key and crucially important. All three parties have a role to play, with the industry, the new regulator and HM Treasury sharing a common vision of the steps that must be taken to deliver the maximum economic benefit for the industry and the country in this critical next phase of the UKCS's life."
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