North Sea Oil Business 'Worst Since 1970's'

A new report has found "striking evidence" of how rising costs, taxes and "inadequate regulation" have taken their toll on the UK oil and gas industry's international competitiveness. Urgent action to secure new investment and address the "collapse" in exploration is needed if the UK is to make the most of its significant untapped resources, according to industry body Oil & Gas UK. Its 2015 activity survey of exploration and production companies operating on the UK Continental Shelf found that revenues declined to just over £24 billion, the lowest since 1998. That, combined with rising costs, resulted in a negative cash flow of £5.3 billion - the worst since the 1970s. Oil & Gas UK's chief executive Malcolm Webb said: This year's activity survey paints a bleak picture but also identifies this region's potential, emphasising the importance of government and industry now putting the right measures in place to secure its long-term future. "This is crucial, not only for the energy security that domestic oil and gas production provides, but also for the hundreds of thousands of highly skilled jobs, advanced technology and billions of pounds of exports which the industry underpins. "Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilising areas of the basin and leaving oil and gas in the ground." Investment in new projects over the next three years was last year forecast at £8.5 billion but this year's survey estimates it at around £3.5 billion. Exploration for oil and gas in the UK last year was also said to be significantly worse than anticipated with only 14 wells drilled out of the expected 25. However, production in 2014 had its best performance since 2000, falling just 1% since 2013 to 1.42 million barrels of oil equivalent per day. But oil prices averaged 99 dollars per barrel in 2014, with the average price in the last quarter significantly lower at 76 dollars. Mr Webb added: "Even at 110 dollars per barrel, the ability of the industry to realise the full potential of the UK's oil and gas resource was hamstrung by escalating costs, an unsustainably heavy tax burden and inappropriate regulation. At current oil prices, we now see the consequences only too clearly." A UK government spokesman said: "The Oil & Gas UK report underlines the need for a concerted and joined-up approach between the Government, the Oil and Gas Authority and industry to ensure investment and exploration in the UK North Sea continues and is able to get through this difficult period. "The UK Government recognises how important the North Sea is, both in terms of the thousands jobs it supports and the benefit it brings to the UK economy. The package of fiscal changes and initiatives announced by Treasury in early December shows the Government understands the challenges and is on the front foot in dealing with them."

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