Page 10: of Offshore Engineer Magazine (Feb/Mar 2015)

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Opinion

Thought Thought Thought ThoughtStream

Mike Tholen, Economics Director, Oil & Gas UK its competiveness and secure future investment.

North Sea:

It is positive news that the govern- ment agrees ? scal policy must now be framed in the context of the sector’s

Challenges ahead wider economic contribution. Indeed, here can be little doubt – either for even more worrying, existing operations the ? rst steps were taken in the Autumn

T us as energy professionals in the are also under pressure, in a “$60 world,” Statement with the proposal of a simpli- sector, or anyone who has picked up a 10% of UK production – including vital ? ed investment allowance and a limited paper over the last few months – that the infrastructure hubs – could be running at reduction in the headline rate of tax.

UK oil and gas industry is facing a seri- a loss, needless to say that that percent- However, these measures were suggested ous challenge. age gets higher as we head below the $50 when the oil price was more consider-

The falling oil price, while great news mark. ably higher than it is now. for the general public, is affecting activity We now need to see, without delay, across the UK North Sea and companies delivery of the full range of ? scal mea- have to take hard decisions in this chal- sures required to sustain this industry, “The UK Continental Shelf lenging business environment. In addi- including, crucially, the investment is a mature basin with tion, to sustain the economic bene? ts the allowance by Budget 2015.

Ultimately, however, should our industry has provided for many decades, mature assets, and these industry not be treated fairly as any urgent action is needed to deliver ? scal will struggle increasingly other business in the UK? We’d argue change by the 2015 budget. That is why if investment to maintain that in time the 30% supplementary we, at Oil & Gas UK, are committed to corporation tax must be discarded, working closely with HM Treasury to do them falls. What’s more, alongside the outdated petroleum just that.

unfortunately, both revenue tax, to ensure our home-grown

In parallel, there needs to be swift exploration and new industry can compete with international implementation of the Wood Review markets. recommendations, while industry investment will also be concentrates on addressing the costs Every barrel we fail to produce under increasing pressure and ef? ciency of its operations across from our own resources will have to the North Sea. Those factors become be imported. Imported barrels do not as prices fall.” ever more pressing in light of current sustain any UK jobs and pay no produc- developments. tion tax.

In January, we saw the oil price fall If government approaches our industry below US$50 per barrel – signi? cantly While it might be hard to be con? - with a long term view – this approach less than half it was six months ago dent of the outlook in such a business will be mirrored from within our sector and the lowest in some years. The UK environment, we as an industry must - as companies will become increas-

Continental Shelf (UKCS) is a mature work in collaboration with all our stake- ingly con? dent in investing in the UK basin with mature assets, and these holders across industry, and crucially North Sea for the long term. That’s what will struggle increasingly if investment across government, to ? nd a cure for our we need to see – for the bene? t of UK to maintain them falls. What’s more, current ills. Our sector is not in danger jobs, UK energy security and the UK’s unfortunately, both exploration and new of total collapse, as has been suggested economy. investment will also be under increasing by some. We believe it can and will pressure as prices fall. adapt – but at what cost? The “cure” Mike Tholen is economics director

Even in the “$100 world,” we were must of course be effective and lasting for Oil & Gas UK. Prior to joining the beginning to face a reigning-in of invest- – crucially, it needs urgent, positive and industry body he worked with Shell ment to conserve capital and improve collaborative action in the weeks and for 20 years, latterly holding a vari- capital ef? ciency; UKCS investment was years ahead. ety of commercial positions including already expected to halve over the next We need to ensure that those ? elds economics and planning manager for four years. In an “$80 world,” accord- acting as hubs for North Sea activity their upstream UK gas business and ing to our data, about a third of these remain active and that industry is sup- Offshore Infrastructure Manager in the opportunities are unattractive. Perhaps ported by the government to increase Netherlands.

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