UK independent oil and gas companies will be incentivised to invest and undertake additional exploration, as Government awards a further 52 oil and gas licences.
UK independent oil and gas companies will be incentivised to invest and undertake additional exploration, as Government awarded a further 52 oil and gas licences today, bringing the total number of offers of awards in the 27th Round to 219 – an all-time record.
The offers included licenses being awarded to 21 smaller independents that are new entrants to the market. This is three times the number provided to independents in the last round. Government is keen to maximise resources available in the North Sea in order to boost energy security, revenues and jobs and support the growth of the oil and gas industry.
Speaking at the Association of UK Independent Oil and Gas Exploration Companies (BRINDEX) Annual Dinner, Michael Fallon announced the awards and said that Government is working closely with industry to put in place the right fiscal and regulatory incentives in order to encourage more exploration by smaller independent companies.
Energy Minister Michael Fallon said:
"The level of interest in this round demonstrates the continuing attractiveness of the UK's oil and resources and licensing system. BRINDEX members form part of the vanguard of oil and gas explorers who are finding new ways to get at and extract these vital resources.
"The UK's oil and gas industry is of strategic national importance. Some 20 billion more barrels of oil and gas could be produced, and it is vital that we maximise the opportunities available both in the North Sea and onshore to boost growth, energy security and jobs.
"Government will continue to support exploration in the sector. We expect considerable interest from developers in the 14th onshore licence round, which we plan to launch next year. We also intend to launch a new offshore round – our 28th - early in the New Year."
Government has already introduced fiscal incentives for offshore exploration, including increasing the size and scope of the small field allowance.
To encourage onshore unconventional oil and gas exploration Government is consulting on a proposed tax regime for shale gas and introducing a new shale gas 'pad' allowance which will reduce the tax on a portion of a company's production income from 62% to 30% at current rates.
The PILOT Exploration Taskforce has been working to encourage smaller companies to look at exploring under-developed areas of the North Sea.
In June 2013, Government announced a review of UK offshore oil and gas recovery and its regulation, led by Sir Ian Wood. Sir Ian Wood recently published his interim proposals, a number of which could contribute to improving the investment climate for independents.
These include:
Improving third party access to infrastructure. Promoting successful collaboration across industry including on rig sharing and deployment of new technologies. Resolving commercial disputes more quickly. Enhancing transparency and access to data.
The final recommendations of the Wood Review will be published in 2014.
