Oil & Gas UK, the leading representative organisation for the UK offshore oil and gas industry, responds to reported drop in UK Exploration.
Mike Tholen, Oil & Gas UK’s economics director , said: “The drop in UK exploration and appraisal activity compared to other sectors of the North Sea since the Budget is a worrying reflection of the negative impact of the surprise tax increase on investor confidence in the UK Continental Shelf (UKCS). Oil & Gas UK’s latest business confidence survey which showed a twenty percent drop in confidence across the exploration, production and supply chain sectors is now backed up by the hard news of a drop in exploration.
“While companies are contractually and commercially committed to many development projects that will go ahead, it is the exploration and future investment activity that investors now perceive as riskier than before and therefore think twice about pursuing. The relatively small average discovery size and resulting lower margin to be made in the UKCS only reinforces that reluctance to invest.
“The UK’s oil and gas resource still offers huge potential for exploration and production but to maximise economic recovery in the long-term for the benefit of the UK economy, energy supply and tax revenues, it is not only the very attractive projects that must go ahead. It is imperative that the economics of less attractive projects are quickly aided by changes to the tax regime which lessen the impact of the tax hike and that exploration for new reserves is encouraged.”
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Source:Oil & Gas UK , July 15, 2011;