U.K. Oil Review Calls for New Regulator to Help Raise OutputNidaa Bakhsh
A review of the U.K.’s oil and gas industry urged the government to set up a new regulator to help increase production in the North Sea as aging fields decline.
The recovery of an extra 3 billion to 4 billion barrels could add 200 billion pounds ($333 billion) to the economy in 20 years, Ian Wood, former head of oil-services provider John Wood Group Plc, said in a report published by the government today. The continental shelf has produced more than 42 billion barrels to date and could pump as many as 24 billion more, he said.
Britain has seen North Sea output dwindle as fields mature. That’s led to higher deliveries from abroad, driving up costs and raising concern that reliance on imports may reduce security of supply. The government in June appointed Wood to study how to get the most from remaining reserves. Prime Minister David Cameron has promised to implement all the main recommendations.
The U.K. needs a “more influential regulator to facilitate and encourage collaboration on exploration, cluster-field development and use of infrastructure,” Wood said in the report. The new watchdog, to be independent of government, would advise companies on efficiency, monitor field developments and may also issue licenses, relieving the Department of Energy and Climate Change of some of its duties.
Additional regulation will burden an industry already facing rising costs and a better solution may be to offer more tax breaks to exploit fields, according to Richard Power, a partner at law firm Berwin Leighton Paisner LLP in London.
“Any report which correctly identifies the challenges facing the industry should be welcomed, but it’s debatable whether the formation of a new regulator will make any significant positive difference,” Power said in an e-mail.
Output from the U.K. continental shelf has fallen 40 percent in the past three years and the efficiency of producing oil and gas has dropped, costing the economy 6 billion pounds, according to the report. Britain relies on North Sea output for more than half its oil and gas consumption.