UK N.Sea oil, gas investment set for record year
* North Sea investment to exceed 7.5 billion pounds
* E&A drilling activity down as companies focus on development
* Analyst expects next licensing round to match December appetite
LONDON, Jan 10 (Reuters) - UK North Sea oil and gas investment is set to mark an all-time high in 2012 as high oil prices entice investors to boost production, showing that the government's surprise tax on output introduced last year has not jeopardised profitability.
Edinburgh-based consultants Wood Mackenzie said in a report on Tuesday that energy company investments were expected to exceed last year's record of 7.5 billion pounds in 2012, which also found that investments should stay consistently high until at least 2014.
The findings reflect increasing appetite for UK exploration acreage after Britain awarded 46 new oil and gas exploration licenses in December, surpassing some earlier licensing rounds and helping counter a decade-long decline in production.
Oil and gas production in the UK North Sea has passed its peak as the larger and easier-to-tap deposits have been pumped out. But geologists say there are still billions of barrels left to produce in smaller accumulations.
Wood Mackenizie expects more than 2 billion pounds ($3 billion) of investment in the prolific West of Shetlands area this year.
Exploration and appraisal (E&A) drilling activity declined last year as companies increasingly turned their attention to commercializing existing UK discoveries, while some North American producers may have shelved their North Sea projects in favour of opportunities elsewhere, the consultancy said.
"Companies have turned their attention away from E&A activity to developing fields for the time being as the stable, high oil price environment has offered them the opportunity to focus on progressing development projects to turn reserves into revenue," Wood Mackenzie lead UK upstream analyst Lindsay Wexelstein said.
Wood Mackenzie anticipates that Britain's 27th oil and gas licensing round will match interest in the latest December round.
In March, 2011, the government raised its supplementary tax on North Sea oil and gas production to 32 percent from 20 percent which was condemned by the oil industry who claimed it would decrease investment, increase imports and drive UK jobs to other parts of the world.
At the time UK Energy Secretary Chris Huhne defended the government's decision to increase the tax, saying higher oil prices would help the investment outlook.
Wood Mackenzie's annual North Sea investment report also found that the economic crisis setback development programs in 2011, with just five new fields starting production. (Reporting by Oleg Vukmanovic, editing by William Hardy)
- Tweet this
- Share this
- Digg this
- Pro-independence Scots narrow gap to victory ahead of vote - poll
- UK's fate in the balance as poll shows record support for Scottish independence
- Child abuse revelations divide "most shameful town in Britain"
- Kremlin adviser says military strategy to reflect Ukraine crisis, NATO expansion - RIA
- Islamic State issues video of beheading of U.S. hostage