North Sea Oil Costs Threaten $1.6 Trillion Needed for GoalsNidaa Bakhsh
North Sea oil operators’ surging costs risk scaring away the more than 1 trillion pounds ($1.6 trillion) of investment needed to meet their production goals, according to industry lobby Oil & Gas U.K.
The country needs that investment if it hopes to recover the equivalent of more than 20 billion barrels of oil, the group said today in a statement. Unit operating costs are about 60 percent higher than as recently as 2011, it said.
“The U.K. has to compete for each and every pound of that investment,” Malcolm Webb, chief executive officer of the industry group, said today in the statement. “If the current trend of rising cost continues, the U.K. Continental Shelf will cease to provide a healthy return on investment.”
Energy resources were central to the debate over Scottish independence, with those supporting a split claiming almost all the oil as the nation’s own. Oil companies were among those who said before the Sept. 18 referendum that keeping Britain’s 307-year-old union was good for the industry because of the stability and certainty it provided.
A review by Ian Wood, former head of engineering company John Wood Group Plc, this year estimated there were 12 billion to 24 billion barrels yet to be extracted from the North Sea. Production has dropped 40 percent in the past three years as fields mature, according to the February report.
“We need a lighter tax burden, a simpler and more predictable system of field allowances and fiscal support for exploration,” said Michael Tholen, director of economics at Oil and Gas U.K. The government is expected to announce the results of its fiscal review in December.