UK launches review of offshore oil and gas

The UK government has launched an independent review of nontax influences on offshore oil and gas activity, acknowledging the need for careful management of a mature but still-promising industry.

Edward Davey, secretary of state for energy and climate change, said Ian Wood, retired chair of Wood Group, will lead the initiative. Davey said he expects “emerging conclusions” to be published in the coming UK autumn and a final report and recommendations early in 2014.

“Declining exploration and production rates, aging infrastructure and declining production efficiency, and the risk of premature decommissioning of key infrastructure all need to be addressed if we are to extract the maximum economic benefit for the UK,” Davey said.

The review thus will focus “factors such as the licensing regime, optimizing use of and extending life of infrastructure, production efficiency, better collaboration across the industry, increasing the exploration effort, and maximizing the use of enhanced oil recovery techniques.”

It also will look at “the current structure, scale, and effectiveness of the government stewardship regime in line with the increased technical and commercial complexity of the mature market,” he said.

Although the review won’t make recommendations on taxation, its findings might influence future tax policy, Davey said.

Industry welcomes review

The industry group Oil & Gas UK welcomed the review.

“In overcoming the challenges of producing oil and gas in a mature province and in ensuring the basin’s full potential is realized, collaboration between companies in the sector and a well-resourced and expert regulator is crucial,” said Malcolm Webb, Oil & Gas UK chief executive. Webb noted Wood’s “decades of experience,” calling him “well-respected and highly knowledgeable.”

James Edens, vice-president and managing director of CNR International (UK) Ltd. and the group’s operator cochair, said, “It is important that we address the challenges of sustaining activity to maximize recovery over the long term.”

The contractor cochair, Gordon Ballard, chairman and country manager of Schlumberger UK Ltd., also welcomed the review and Wood’s role in it. Over 40 years, he said, the UK oil and gas supply chain has developed “world-class expertise and technology,” supporting production and contributing to economic growth, employment, and tax revenue.

“If this industrial jewel is to remain anchored in the UK, sustained investment in offshore oil and gas is crucial,” Ballard said.

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