Economic Report 1999 Index

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The Challenge Ahead   The UKCS is a mature region compared with new provinces opening up elsewhere and new UK fields are considerably smaller than those discovered in the past. The Industry Technology Facilitator has been established to enhance opportunities for operators, suppliers and contractors to find cost effective solutions to retain the UK's ability to compete.   Currently industry average returns from North Sea exploration and development activity are marginal. Sustaining an active and successful exploration programme will require a more focussed approach and reduction in field life costs.   Existing infrastructure in the UKCS provides a large potential for further brown field development - about 2 billion barrels of oil equivalent - but the window of opportunity for incremental investment for maximum reserve recovery is limited, in some cases, to some 3-4 years. UKOOA's data indicate that the industry has identified some 78 projects for incremental investment, but currently incremental investment for mature fields is discouraged by tax rates as high as 69%.   The key to opening up additional UKCS exploration and production will be further cost reductions and new technology. The Leading Oil and Gas Industry Competitiveness (LOGIC) initiative has been established to find ways of achieving these goals.   The introduction of additional UK and EU regulation has increased costs and administrative burdens throughout the industry e.g. OSPAR. Care must be taken to ensure that regulation does not impact on UKCS competitiveness.   Industry dialogue and continued partnership with Government are essential if the challenges are to be fully addressed to ensure that the UKCS is able to succeed in an increasingly competitive global market.