Oil rig

Recent tax changes introduced by the UK Government for the oil and gas industry have resulted in more companies investing in the North Sea, which has hit a 30-year investment high, with further increases expected, according to a new report published by Oil & Gas UK.

According to the 2013 Activity Survey, investments ranged from projects of less than £50m to more $1bn pounds.

The report said that investment is anticipated to increase even further to about £13bn in 2013 and create thousands of jobs across Britain.

Encouraged by the tax breaks, oil and gas companies are now planning to invest close to £100bn, the report forecasted.

Oil & Gas UK chief executive, Malcolm Webb, said the UK continental shelf (UKCS) is experiencing strong investment, which has not been seen in three decades, in new developments and in existing assets and infrastructure, marking an end to tax uncertainty and low investment in the last two years.

"According to the 2013 Activity Survey, investments ranged from projects of less than £50m to more $1bn pounds."

"The recent introduction of targeted tax allowances to promote the development of a range of difficult projects, coupled with the government’s ground-breaking commitment to provide certainty on decommissioning tax relief, has prompted global companies and independent businesses alike to take another look at the UK as an investment destination and resulted in a new wave of investment," Webb added.

The number of projects submitted to the Department of Energy and Climate Change (DECC) and given development approval almost doubled between 2011 and 2012. Since January 2012, the DECC has approved a total of 33 projects, which involves an investment of £13.4bn.

The report states that sanctioned reserves jumped in the beginning of 2013 to 7.4 billion boe, the highest level for six years, while the total reserves on companies’ plans dropped by half a billion boe.

"Only 21 exploration wells per year on average were drilled over the last three years. As a result, in 2012 not enough barrels were discovered to replace all those produced," Webb added.

"However, again, there is real cause for encouragement as the survey results lead us to forecast 130 exploration wells over the next three years which, alongside the use of new and improved sub surface technology, should result in many more barrels being discovered."

According to the report, production in 2012 dropped to 1.55 million boe per day, down by 14% from 2011 and down by 30% from 2010, which is mainly driven by the frequent adverse tax changes in the mid-2000s.

The report added that production, which may drop slightly in 2013 to 1.45 – 1.5 million boe per day, will again rise to about two million boe per day by 2017.

"Seventy percent of British energy requirements will likely still need to be met by oil and gas into the 2040s," Webb added.

Image: Tax breaks have encouraged oil and gas companies to invest in North Sea projects. Photo courtesy of freedigitalphotos.net / think4photop.