Over £1 trillion of investment will be required to recover all of the remaining oil and gas that is thought to exist offshore in British waters, according to the latest industry report from Oil & Gas UK.Unless more incentives are provided for drillers to work in the UK Continental Shelf (UKCS) and offset the increase in costs of operating there then the UK will struggle to recover the 20bn barrels of oil equivalent (boe), or above, that are thought to remain offshore, warned Malcolm Webb, chief executive of Oil & Gas UK.
“Maximising recovery from the UKCS is the collective responsibility of all those who fund, regulate, tax and operate the offshore oil and gas industry and achieving our full potential will require a tremendous effort on the part of everyone involved,” said Mr Webb. “Our industry makes far too important a contribution to the economic and energy security of the nation to be allowed to falter at this critical point.”
The report shows that production in the first half has bounced back after suffering several years of double digit declines. The latest figures cited in the report from the Department of Energy & Climate Change show that output mainly from the North Sea grew by 1pc in the first six months, compared with a year earlier, after almost £28bn was pumped into boosting production since the beginning of last year.
Some estimates have placed the volume of oil equivalent, a measure which includes gas and condensate, that could still be recovered in the area known as UKCS as high as 30bn barrels.

Michael Tholen, Oil & Gas UK’s economics director added: “We need a lighter tax burden, a simpler and more predictable system of field allowances and fiscal support for exploration. The outcome of the Fiscal Review, expectedto be announced in December this year, must be relevant, radical and robust.”The North Sea and estimates of how much oil can be extracted from the region was a key economic battle ground during the recent Scottish referendum, with Alex Salmond’s estimates on the region’s potential revenue attacked by leading industry figures such as Sir Ian Wood. However, the latest report from Oil & Gas UK suggests that the North Sea and more challenging areas west of Shetland may only achieve their remaining potential if significant incentives are given to oil companies.

International oil majors such as Royal Dutch Shell, BP and Chevron, which are operating currently in the North Sea, are currently faced with a wealth of new opportunities that are opening up for the industry in emerging regions such as Mexico, Africa and the Arctic. Combined these make the UK potentially less attractive for drillers.Meanwhile, Oil & Gas UK said that it was aware of 150 projects offshore in British waters that are seeking investment and final sanction. The industry body stressed it is “important these are brought through to development” in the report published Tuesday.

In March, Chancellor George Osborne announced new incentives for investment to drill in so called “ultra high-pressure, high temperature” aimed at helping to reverse a drop-off in output in the North Sea to levels last seen in 1977.