Government heralds a new dawn for North Sea oil and gas
28 March 2013
An oil and gas strategy to secure billions of pounds of future investment and thousands of jobs will be unveiled today (Thursday March 28) by the UK government.
Tax certainty, supply chain support, and bridging skill gaps will provide continued growth, Business Secretary Vince Cable, Energy Secretary Ed Davey and Scottish Secretary Michael Moore will tell business leaders in Aberdeen.
Developed in partnership with industry, the strategy offers investment confidence and security by setting out a clear path to exploit the UK’s remaining resources and overcome an increasingly challenging production environment.
This follows the recent launch of the aerospace and nuclear strategies and is the next step in the government’s industrial strategy. Strategies for eleven key sectors will be completed in partnership with business in the coming months to secure sustainable future growth in the economy.
UK oil and gas production is vital for energy security and to the economy, employing over 400,000 people.
The action points and programmes already underway include the following:
- Maintaining a fiscal regime that encourages investment and innovation in the UK Continental Shelf. This includes guarantees on tax relief for decommissioning as announced by the Treasury in last week’s budget.
- Developing the UK supply chain further so that UK supply chain firms can build on the £27 billion of revenues which they already generate in the UK. Fabrication has been identified as one area to target to ensure the UK remains competitive in domestic and international markets.
- Provision of specialist support from UK Trade and Investment (UKTI) to look at how the UK supply chain can increase exports in the sector, building on the increased funding of £140 million announced in the Autumn Statement to help small and medium enterprises (SMEs) export abroad. This is to capitalise on high value opportunities in markets such as Brazil, Mexico, Saudi Arabia and Australia.
- Filling the skills gap, which is seen as one of the biggest challenges facing the oil and gas industry, especially for SMEs. Work is underway to develop and match the skills needed within the industry and see how future or existing programmes can help.
- Encouraging more technological advancement through research and development, which will enable industry to better understand complex reservoirs, reduce drilling costs, improve efficiency and enhance production.
- Raising the profile of Britain’s growing oil and gas sector, to foster innovation and attract the best talent, including the imminent launch of an Oil & Gas UK campaign to raise awareness among the general public.
- Developing work between the financial services’ sector and industry to address challenges of access to finance. The government’s ‘business bank’ will help small and mid-sized businesses access finance including by communicating existing schemes.
Vince Cable and Ed Davey will also open a new facility at Expro, an offshore and technology services specialist in Aberdeen. To meet increasing business demand, the company has created more than 150 new jobs in the UK over the past year. Ahead of the strategy launch, Business Secretary Vince Cable said:
“The oil and gas industrial strategy is the start of a real plan of action owned by industry and government. It is a strategy that all sides are committed to, so that future decades of investment and growth can be maintained in the North Sea.
“An important part of this strategy is how we can develop the UK supply chain. I want us to consider what barriers are stopping British companies bidding for and winning work in the North Sea.
“This is an expanding industry. We can either help create more jobs and opportunities across the UK if we get this right. Or see work going overseas if not.”
Last month trade body Oil & Gas UK said firms were planning investments totalling around £100 billion on the United Kingdom Continental Shelf. It is expected to rise to a record £14 billion in 2013, from £11.4 billion in 2012.
Malcolm Webb, Oil & Gas UK's chief executive said: “Close engagement with the UK government and the resulting tax changes introduced last year to promote investment in the oil and gas sector are now bearing fruit. Record investment is forecast this year to search for and produce UK oil and gas reserves. This will be followed by an upturn in production from 2014, sustaining growth across the supply chain and reinforcing the industry’s already significant contribution to the UK economy.
“The launch of the government’s strategy for the sector is one more step in the right direction and brings deserved recognition to the capabilities of our world class supply chain.
“The strategy fosters strong and meaningful collaboration between the government and industry and will help to focus efforts on addressing particular areas such as skills, technology and exports. It will further strengthen the oilfield services sector across the country, boost investor confidence, safeguard jobs and help to maximise recovery of Britain’s oil and gas reserves.”