Barrels half full or half empty?

NORTH SEA OIL RIG.ENNELPRISR OCI (?)
NORTH SEA OIL RIG.ENNELPRISR OCI (?)

Almost $6 billion worth of mergers and acquisitions have taken place in the UK oil and gas sector in the first half of the year.

This sends a strong vote of confidence in a basin that has been grappling with the challenges of a major downturn, a new report reveals.

Assets changing hands and the increasing diversity in their ownership suggests that the UK Continental Shelf may start to benefit from a badly needed investment boost, says Oil & Gas UK’s Economic Report 2017 – the trade body’s annual review of industry performance and outlook, launched at Offshore Europe in Aberdeen.

Although market conditions remain difficult, the report demonstrates that the UK sector is reinventing itself. It is differentiating its offering from competing oil and gas provinces with its efficiency gains, fiscal competitiveness and world-class supply chain.

While investors still want more certainty over Brexit and clarity over the role of oil and gas through a more comprehensive energy policy, the transformation under way is restoring the UK’s position as an attractive basin for investment.

The Economic Report also shows:

Companies are more efficient and competitive;

The cost of lifting oil from the North Sea has almost halved since 2014;

Production has increased by 16% since 2014;

Businesses have rationalised but the pace of contraction is slowing;

Over 300,000 UK jobs are now supported by the sector;

Changes to the tax regime have helped create one of the most competitive fiscal regimes for upstream investment globally.

While confidence is slowly returning, challenges continue. The report says:

The low levels of exploration and appraisal activity remain a serious concern with drilling at record lows;

The basin still needs further fresh capital investment, as only three new field approvals have been sanctioned since the start of 2016;

If activity does not pick up this could have further negative implications for jobs that could threaten core capabilities.

Industry needs the UK Government’s ongoing commitment to the Driving Investment Plan and for Government to implement transferable tax history (TTH) to facilitate asset transfer.