Economy between a rig and a hard place

By Tom Bergin

SHEARWATER PLATFORM, NORTH SEA (Reuters) - Oil rigs dot the horizon, while above, an orange ball of fire gushes from the flame tower, reddening the cheeks of people standing on the helideck.

"We're coming out of a shutdown for maintenance. We need to flare the gas until we're back to online," shouts installation manager Jim Cook above the roar of the blaze and the hum of the power turbines below.

"Then we'll be doing over 80,000 barrels per day."

Flaring up for Britain's economy is the prospect of an end to North Sea oil and gas, with no clear replacement.

Weak oil prices, rising costs, and very narrow fiscal leeway to offer oil majors tax incentives are encouraging some to quit just as Britain struggles to recover from financial meltdown.

"As oil revenues were going down, City revenues were going to take their place, but then all of a sudden City revenues have disappeared," said John Curtice, politics professor at Strathclyde University.

"It's part of the backdrop to the financial crisis -- we have to find other sources of revenue."

North Sea oil and gas revenues originally came when Britain's economy was in such straits the government turned to the IMF for a loan in 1976: they funded the country's economic restructuring under Margaret Thatcher.