Economic Report 2000 Index

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Industry Activity in 2000 Investment Climate The confidence of North Sea operators increased during 2000. The traumatic events of 1998 and 1999, when oil prices fell to below the full life cost of production, led to major rationalisation across the industry and a decline in new activity. This coincided with the maturing prospectivity of the region and the growing likelihood that in future new developments will be small, unlike their predecessors which required major platforms and infrastructure investment. However, with significant efforts of individual companies and through Government/industry task force (PILOT) initiatives, costs and risks are being reduced and activity has begun to accelerate. The risks and uncertainties facing the industry come in many forms. Some lie within the control of operators and their suppliers. These include planning, research and development, production processes and activities, the availability of resources and all the related costs. Some are within the control of Government. These are the fiscal, licensing and other regulatory issues that affect the cost and pace of operation. Finally, there are some risks and uncertainties that are largely beyond the control of either the industry or the UK Government, which include not only the natural reservoir risks but also the movement of global markets. The partnership between Government and industry, known as PILOT, that is working to manage and overcome the controllable risks is creating benefits for both parties. At the same time, global demand for key items of specialised equipment has created pressure on the UKCS industry as some resources have been moved away to other competing basins. If this continues to happen it will put at risk the attainment of PILOT's investment and replacement objectives. "Now we have some real signs of an upturn and turn around in job prospects." Danny Carrigan, National Officer, AEEU