An urgent report to address major concerns about the health of the North Sea oil industry amid the plummeting oil price has been commissioned by the UK Government.
The UK Secretary of State for Energy and Climate Change, Rt Hon Edward Davey MP (pictured), has tasked the head of the Oil and Gas Authority - a new arms length body to oversee the industry but that has yet to be fully set up - to suggest "practical measures to mitigate the immediate risks that the downturn in prices" presents the industry.
Davey made the announcement during a visit to Aberdeen today (January 15) for talks with oil and gas industry leaders. The same day, BP announced it was making up to 300 job cuts, making it the latest firm in Aberdeen to cut contractors and staff against a back drop of oil prices which have halved since summer last year to about $50/barrel.
Andy Samuel, CEO designate of the Oil and Gas Authority will lead the commission, working with industry, to identify key risks to oil and gas production in the UKCS and identify what further measures might be taken by government and industry to mitigate them.
Last year, even before oil prices started falling, there were concerns about the future of the industry, with falling production and drilling rates compounded by ever-increasing costs. The government had agreed to forming the new Oil and Gas Authority and was already under taking a review of the tax regime in the North Sea, among other measures, as a result of a report by Sir Ian Wood, which was commissioned in 2013. However, the fall in the oil prices has led industry body Oil & Gas UK to call on the Treasury to go futher.
Davey said: “The oil and gas industry is used to volatile prices in world markets and will get through the latest downturn as it has in the past. However, given the huge value of the UK Continental Shelf to the nation and the relatively high cost base that it has, I am concerned to make sure that it does so in the best possible shape for the future and well placed to deliver our goal of maximising economic recovery as set out by Sir Ian Wood.
“I am therefore today asking Andy Samuel, CEO of the new Oil and Gas Authority, to undertake an urgent piece of work, involving industry, to come up with practical measures to mitigate the immediate risks that the downturn in prices presents us with. There is a lot at stake and I know that industry leaders will lend weight to the work that I have asked Andy to do. I have asked Andy to present his early findings to me by the end of February.”
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