The UK Offshore Sector in a $60 World: Q&A with Deirdre Michie
Rigzone: What further measures can be taken by government and the industry itself in the immediate future to boost exploration in the North Sea and elsewhere around Britain?
Michie: Oil & Gas UK has had good cooperative relationships with both the UK and Scottish governments and we look forward to continuing this constructive way of working with the new UK Government.
The rate of exploration on the UKCS remains extremely low, with just 14 exploration wells drilled in 2014, and only seven so far this year – at a time when industry should be aiming to drill upwards of 30 wells a year to reinvigorate the basin. That harsh fact underlines why we need effective regulatory, licensing and fiscal measures in place by Budget 2016 at the latest.
The industry is currently working with the Oil and Gas Authority (OGA) on technical measures to promote the discovery and development of prospects, including the new seismic surveys funded by HM Treasury, but this work alone will now allow us to turn the corner.
HM Treasury has already proposed in the March Budget to consult on further measures to support exploration, improve access to decommissioning tax relief and reform the fiscal treatment of infrastructure. With the Summer Budget now behind us, it is imperative the HM Treasury commence these consultations to ensure the fiscal regime drives investment through the downturn.
Rigzone: Earlier this year, the Chancellor issued a raft of tax relief measures that are designed to boost investment in exploration and production in the North Sea. In your opinion, can he go further and what other measures could he introduce?
Michie: The measures announced in the Budget were very welcome and the Treasury has recently confirmed that the scope of the investment allowance will be extended to include a broader range of productive expenditure. HM Treasury has also confirmed plans to engage with the industry later this summer on measures to promote exploration and address infrastructure and the decommissioning challenge.
Following the Treasury's announcement of GBP 20 million [$31 million] of funded seismic surveys in under-explored areas of the UKCS, Oil & Gas UK is working with the OGA to help ensure that is carried out to the greatest benefit.
Industry needs to look holistically at why exploration has slumped in recent years and work with the OGA and government to address from all angles – including better use of technology, rig availability, resourcing and access to infrastructure and finance. Drilling more wells is not the only answer as there are hundreds of undeveloped discoveries in the UKCS. There are significant efficiency gains to be made in the exploration process via better analysis of existing data on discoveries.
Rigzone: Given that companies have been laying off offshore workers in their thousands in recent months, is the Great Crew Change still an issue in the low oil price environment?
Michie: Having people with the right skills to lead this industry forward remains a real priority.
One of the key messages from the previous eight “Demographics” reports published by Oil & Gas UK and from “Fuelling the Next Generation” is that the concept of the ageing workforce and hence the Great Crew Change is a myth; eight years of data shows that the average age of the offshore workforce remains at 41.
We have better information than in the past on future skills requirements following the commissioning and publication of the EY study (Fuelling the Next Generation) – which aligns with the UK Government's industrial strategy for oil and gas, and it is our hope that the data from the report will help the industry plan its future activities more effectively.
At the same time, we recognize that times are tough for the industry, and they're likely to stay tough. That's why we are participating in the Scottish Government's Energy Jobs Task Force, helping to shape the support available to ensure the needs of our sector are met.
Rigzone: In your opinion, is workforce diversification still something the industry should focus on while there is a downturn going on?
Michie: Whilst almost no sectors can offer a “job for life” these days, we believe this industry can offer skills for life. It is absolutely vital, if we are to meet the challenges ahead, that we have the best possible people taking our industry forward. To this end, it is imperative – not just for our industry but for UK plc – that young people of both sexes are encouraged to study and pursue careers in science, technology, engineering and maths.
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