New Oil and Gas Authority issues call to action for North Sea operators

A report rushed out ahead next month's Budget suggests oil and gas operators must become more collaborative

Danny Lawson/PA Wire An oil rig in the North Sea
An oil rig in the North Sea

An urgent call has been issued for North Sea oil and gas operators to collaborate on work to maximise the UK’s energy assets.

The newly formed Oil and Gas Authority, an executive agency of the Department for Energy and Climate Change, has rushed out its assessment of the North Sea oil and gas industry and drawn up a list of actions it expects from the industry.

Led by new chief executive, Andy Samuel, the former managing director of BG Group’s exploration and production in Europe, the Oil and Gas Authority (OGA) said it requires “stewardship improvement plans” from the top 20 production operators.

The plans aim to mitigate the negative impact of cost reduction programmes carried out by operators which could include loss of skills for the future and failure to maximise production from existing wells.

The report, hot on the heels of this week’s “bleak” activity survey by industry group UK Oil and Gas, recognises that declining profit margins for many oil and gas operators could spell a “domino effect” of early decommissioning — leaving oil in the ground.

Many oil producers are lobbying for tax cuts in next month’s Budget. In its report, the OGA said it would support the Treasury as it develops a new fiscal regime to build confidence among investors.

The body also said it would prepare “Regional Development Plans” for critical regions in the North Sea, using data provided by operators.

UK government ministers are due to meet industry leaders this week to discuss how taxation could be changed support investment.

The meeting will be chaired by the Chancellor George Osborne, who hinted on Tuesday that he could further cut the headline rate of tax for North Sea oil operators in the Budget.

Dr Samuel said, “Significant hydrocarbon resources and economic value are yet to be delivered from the UK North Sea but to unlock this potential we must create a more competitive and efficient operating environment, where costs are effectively managed and companies have the confidence to invest today and tomorrow.

“I am working at pace to establish the OGA as a strong and effective regulator, which can be a catalyst for change and a facilitator of action. It will seek to drive performance and remove unnecessary barriers to help protect current oil and gas production and secure a positive future for the industry.

“But the OGA cannot achieve these outcomes in isolation. I have highlighted the key risks facing the industry, priority actions required and my expectations on delivery. Now industry, Government and the OGA must build on the positive tripartite relationship, which has developed since the publication of the Wood Review, to demonstrate collective leadership and deliver solutions. The future of our oil and gas industry depends on it.”

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