Sir Ian Wood, recently retried Chair of the Wood Group, a multi-national engineering services company focused on the energy sector, has published his interim report revealing the economic and energy security opportunities still available from the UK’s offshore oil and gas resources.
The “UKCS Maximising Recovery Review”, the first of its kind in more than 20 years, was commissioned by the government in June 2013 to look at how we could ensure longevity of the oil and gas industry and the UK’s resources.
Sir Ian’s interim report estimates that full and rapid implementation of his recommendations will deliver at least 3-4 billion barrels of oil equivalent (boe), more than would otherwise be recovered from the UK’s waters over the next 20 years, bringing over £200bn additional value to the UK economy. His recommendations include:
- a new shared strategy for “maximising economic recovery (of oil and gas) for the UK”, with commitment from the government (HM Treasury and a new Regulator) and the oil and gas industry.
- creation of a new arm’s length regulatory body to oversee and develop this programme of change and growth.
The UK’s oil and gas industry is of national importance and makes a substantial contribution to energy security and the economy. For decades the oil and gas sector has been one of the UK’s major industrial success stories, a key contributor to growth, jobs and tax revenue. In 2012-13 the industry paid £6.5 billion in corporate taxes on production, 15% of all corporate taxes in the UK, and supports the employment of 450,000 people across the UK.
41 billion barrels of oil and gas have already been produced from the UK Continental Shelf (UKCS), and 20 billion or more could still to be produced. Sir Ian believes that implementing the recommendations of the review will deliver at least 3-4 billion barrels of oil equivalent (boe) more than would otherwise be recovered, worth £200 billion. The report comes five months in to Sir Ian’s review with a final report to be published in early 2014.
The second half of the review will focus on strategies to make the most of the economic opportunity offered by retrieving offshore oil and gas, accounting for feedback on the interim findings and further details on the evidence for a new arm’s length body.
Of the report Edward Davey, Secretary of State for Energy and Climate Change said:
“Our offshore oil and gas fields are one of Britain’s great natural assets, and I’m determined that they should stay that way. They are good for our energy security, because if we improve what we’re recovering domestically, we reduce our reliance on foreign imports. They are good for the economy, supporting jobs and thriving communities. And they are extremely good value for taxpayers.
“There are people who would try to talk down their untapped potential, but today’s report shows that with strong, co-ordinated stewardship by the UK Government, working in partnership with world-class operators, we can boost future returns by at least £200 billion – and potentially much more.”
“This report has given government and industry alike plenty to think about, and I’m looking forward to receiving Sir Ian’s report and setting out our plans to make the most of our offshore oil and gas fields in the New Year.”
Oil & Gas UK welcomes the report
In a separate statement Oil & Gas UK said that Wood proposals provide catalyst for maximising UK oil and gas recovery.
Malcolm Webb, Chief Executive, Oil & Gas UK said:
“The UKCS is a highly competitive environment, with a record £13.5 billion being invested in 2013. Yet the industry has changed considerably over the past twenty years. It is much more complex, with the range of companies active in the North Sea growing in diversity. The number of fields in operation has climbed from 90 to over 300 since the 1990s while the average size of new discoveries and daily production rates are falling.
“This is a changing landscape but the challenge remains constant – how to maximise economic recovery of the UK’s remaining oil and gas resource.
“It is clear from today’s record investment that there is an appetite to do business here in the UK. The industry made it clear in its response to Sir Ian Wood’s consultation that there is also an appetite to examine how we do business here and recognition of the need for a fundamental change of approach if we are to secure the next phase of offshore oil and gas development in the UK.
Webb adds: “A new level of collaboration will be required. The catalyst for that will be the proposed arm’s length regulatory body to take on the stewardship role for this new era. We welcome this proposal as an opportunity to build on the existing regulatory regime and take it to a new level. The creation of a well-resourced arm’s length Regulator will, we believe, provide the single-minded focus required to deliver the maximum economic benefit for the industry and the country in this critical next phase of the UKCS’ life.
“But there is no time for delay. To maintain high investment in this basin and prevent premature decommissioning of infrastructure, the Government needs to move swiftly ahead with these proposals. Oil & Gas UK looks forward to the publication of the final report early next year and the opportunity to work with Industry and the Government to put these recommendations in place.
November 11, 2013