The decreasing supply of oil and its increasing prices are compelling oil companies in Britain, both private and governmental, to carry out further exploration at sites that might have been left even marginally unexplored. This is being done despite the fact that these sites, located in the North Sea, are difficult to access and extract oil from. However, the UK has been counting heavily on high-end technological innovations from related industries, the enormous expenses notwithstanding. For example, it is relying on steel pipe companies for the production of sturdy underwater steel pipes to overcome the hurdle of acquiring billions of barrels of hard-to-extract oil.

The British government has been talking of easier and quicker ways to extract oil from the North Sea and is thought to be using a more hands-on approach to doing so by trying to persuade Scotland to remain part of the Union. It is also considering reforming the oil industry by bringing in a combination of a stronger and more independent regulatory authority, tax breaks and increased investments. Around 40 billion barrels of oil have already been extracted from the North Sea so far and it is estimated that another 20 to 24 billion barrels could still be extracted. However, a lot is dependent on how UK finally manages to acquire and develop these remaining resources.

According to the recent report submitted by Sir Ian Wood, former chairman of oil services company Wood Group, one can point out some of the concerns related to the oil extraction in the North Sea as follows:

The Urgent Need for New Reforms

Keeping in mind the urgency of trying to obtain the hard-to-extract oil fields in the North Sea, Britain has considered bringing about certain much needed reforms in the UK oil industry. These reforms are aimed at cutting the existing red tape and facilitating better sharing of available infrastructure and geophysical data. The government of Britain has said that bringing such reforms into effect will enable them to encourage collaboration within the oil industry and recover an additional 4 billion barrels of oil to overcome the problem of plummeting oil production.

Britain is focusing on setting up a new industry-funded regulatory authority as one of its immediate concerns. It is also considering giving out production licences to companies and contractors on the premise of recovering the maximum amount of oil in all its capacity rather than from an individual licence block. It is being widely speculated that the government’s decision will affect the major players of the UK oil industry such as Shell, Statoil and BP (formerly known as British Petroleum) as they are expected to fund the payment to the new regulator.

Problem with Oil Fields and Infrastructure

While most of the North Sea oil platforms and pipelines are nearing the end of their operational life, time has become of the essence to the UK government as they are yet to develop a strategy to get to those oil reserves. It is interesting to note that it is not the oil reserves that are completely depleting, but that the means to get to these reserves are getting more and more expensive, thereby making it difficult to recover the oil. It doesn’t help that the major oil companies with the required infrastructure are diverting their efforts and equipment to other parts of the world. These firms are apprehensive of the high drilling/extraction costs, and taxes that come with venturing into the North Sea project, which is keeping them from focusing on this area.

The changes in the terms of the provision of licences has found support in the oil industry stalwarts and companies like Shell and BP have welcomed the idea of maximising oil production from the North Sea, in return for tax breaks and better infrastructure.

The Scotland Issue

As most of the unused oil reserves fall under Scottish waters, the government of Britain is continuing its efforts to convince Scotland to remain a part of the UK by trying to show them that being a part of the Union would best work in their interests. However, Alex Salmond, leader of the pro-independence Scottish National Party, is of the opinion that the oil industry would be steadier and grow faster in an independent Scotland. As he stresses on the need for “the Norwegian approach to things as opposed to the Westminster approach”, he reasons that Britain wants to continue to have a hold on Scotland’s resources to benefit from it as they have for the last 40 years.

However, those who oppose Scottish independence maintain that the oil industry would largely benefit from being part of the UK-wide economy. Both the Edinburgh and Westminster governments are expected to announce their respective policies regarding their vision for the North Sea.


As both, Britain and the Scotland continue to argue over maximizing production in the North Sea, it is left to be seen as to what this entire issue boils down to. Whether Scotland can trust Britain with its natural resources and fair distribution of the benefits and profits gained from them is something only time will tell. The UK continues to be the biggest investor in the North Sea operations and by exiting the UK, the Scottish National Party would risk dividing the UK financial and regulatory policies. These policies are crucial to Scotland as they are highly instrumental in acquiring the investment that creates employment for the Scottish people.