UK pumps £13.5bn into oil and gas to combat rapidly declining production
Investment into North Sea oil and gas will reach record levels in 2013, with £13.5 billion pumped into an industry whose production has dropped off significantly in the last decade.
Trade body Oil & Gas UK’s Economic Report for 2013 says production dropped 19.2% between 2010 and 2011, and 14.5% between 2011 and 2012.
In 2003, just less than 4m barrels of oil equivalent (boe) were produced every day. By 2012, this figure had halved. If the rate of decline continues, Oil & Gas UK expects a further 8.5% drop in 2013.
However, speaking to BBC Radio 4’s Today programme on Wednesday, chief executive Malcolm Webb described the findings of its report as “good news”.
“This capital investment is going to pass through eventually; it’s going to have its effect and we will see an increase in production”, he said.
“But right now, we’re suffering from a sort of legacy of the wrong conditions in the North Sea and we are seeing a continuing decline. That’s going to turn and this investment is going to have its impact.”
The economic analysis of the UK’s oil and gas industry comes just four months after the release of the thinktank Carbon Tracker’s Unburnable Carbon study, which said that some 60-80% of known fossil fuel reserves need to be left in the ground if the world wants to avoid runaway climate change. This financially-motivated argument has led many major investors, including Norwegian pension fund Storebrand, to turn their backs on the fossil fuel industry.
A spokesperson for Oil & Gas UK said it “would need to read the report in detail and have time to digest what it has say before commenting on what it says”. However, it added, “Oil and gas will continue to play a role in sustaining our economy and lifestyles – according to the UK government, still providing 70% of our primary energy needs in 2030 – as we move to the alternative energy forms which future generations will need.”
Asked about the report’s failure to mention climate change more than once, the spokesperson said, “The focus of the Economic Report is on the current economics of the industry and Oil & Gas UK is producing an environmental report in autumn 2013.”
They added, “The fastest, least risky (technically and financially) and cheapest way for the UK to reduce emissions substantially in the next 10-15 years is to build gas-fired power stations to replace the old coal and oil fired ones which will have to be retired during this period.
“If all of the electricity generated by coal and oil in 2012 were replaced by gas generation, CO2 emissions would fall by roundly 50 million tonnes a year, with other air quality benefits through much lower emissions of nitrogen oxide, sulphur oxide, heavy metals and particle matter. The industry is also investigating the possibility of investing in carbon capture and storage and several projects are under consideration.”
In March, the government unveiled a series of measures to boost the oil and gas industry. These included improved research facilities and tax reliefs that it said will help the UK exploit its “remaining resources and overcome an increasingly challenging production environment”.
On the Today programme, Webb added that the government had “been doing the right thing” to encourage investment in the industry, instead of discouraging it through excessively high rates of taxation.
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