The UK government believes there is much greater opportunity in developing the North Sea's remaining oil and gas resources than in the fledgling onshore shale gas sector, and plans to implement speedily recommendations laid out in a final report on maximizing offshore recovery, UK Secretary of State for Energy and Climate Change Ed Davey said Monday.
Speaking at a press briefing from Aberdeen, Davey said the UK would move forward "with gusto" to set up a new regulator for the UK's offshore oil and gas sector as recommended by the Wood Report, published Monday, in a bid to improve collaboration and investment in the North Sea.
Davey said there was concern over falling production in the UK North Sea and that the Wood Report was the first step to "slowing or turning around" the downward trend.
He said the offshore still represented the greatest opportunity for improving the UK's energy security.
"There has been rather too much emphasis on shale," Davey said. "There is a greater opportunity that is quicker to realize offshore. That is for certain," he said.
Davey said it was still uncertain whether any major finds could be made through onshore shale exploration.
"We have greater confidence that the result of this review, implemented quickly, will result in more oil and gas being produced, reducing imports, increasing our energy security, increasing our growth and increasing our tax revenues," he said.
"It is right and timely that we re-balance this debate. We need to remember how important the oil and gas industry is to the UK's energy, our economy. The Wood Report is a seminal moment because it shows the UK government is backing the oil and gas industry to the hilt to effect those changes and those improvements so we can have more secure, home-grown oil and gas supplies," he said.
MORE COLLABORATION
One of the main focuses of the report was the setting up of a new regulator to promote increased collaboration across the industry.
The UK government said it could receive a potential GBP200 billion ($320 billion) boost over the next 20 years through the recovery of an additional 3 billion-4 billion barrels of North Sea oil and gas.
Davey said the UK would work quickly to implement the new regulatory body, which would have increased resources to enforce existing rules on issues such as third-party access to existing oil and gas infrastructure.
The UK's offshore operators association Oil and Gas UK welcomed the proposals, saying that the changing needs of the aging North Sea oil industry required a fundamental change of approach on regulation of the sector.
"Collaboration is key here," Oil and Gas UK chief Malcolm Webb said at the Aberdeen briefing.
Webb added that the industry was "fully aligned" with the recommendations in the Wood Report.
Pushed on how the recommendations would be enforced to encourage greater collaboration, particularly in third-party access to infrastructure, Davey said that the North Sea had changed in recent years, where there were fewer big fields and many more smaller fields.
"It is a much more complicated sea," Davey said.
"The regulator must have powers to regulate the [North Sea] basins," he said.
'TOO MANY DISPUTES'
Ian Wood, author of the report, said there had been too many disputes between operators in the North Sea that had held up developments.
"It will not be easy -- we are talking about big companies, that are very individualistic. We all know there have been too many failures to connect, too many disputes, too many lost opportunities," Wood said.
"Exploration is at a worryingly all-time low. Much oil and gas could be left in the ground," Wood said.
Webb said it was critical to encourage new exploration in the North Sea following a recent slump.
"We have also seen record operating expenditure last year, and this is a serious concern to us," Webb said.
He also said that the fall in drilling in 2013 was due to a lack of rig availability, and that something needed to be done to address that.
Wood said he was hopeful that his recommendations could boost North Sea activity.
"There is new momentum. Industry, through various groups, are beginning now to look seriously at how they can collaborate. I do believe they'll need the regulator to guide and facilitate. But they are already thinking -- there will be a mindset change that will open doors," Wood said.
"This is not a twilight industry."
