* North Sea investment to exceed 7.5 billion pounds
* E&A drilling activity down as companies focus on
* Analyst expects next licensing round to match December
LONDON, Jan 10 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
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
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
Wood Mackenzie anticipates that Britain's 27th oil and gas
licensing round will match interest in the latest December
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)