Brown: UK Gov must do more on oil and gas exploration

The UK Government must urgently provide further fiscal support for exploration in the oil and gas sector, Cabinet Secretary Keith Brown will say at Oil and Gas UK’s ‘Open for Business’ conference on Tuesday in Aberdeen.

Exploration levels currently sit at an all-time low, with recent projections for 2016 estimating half the number of exploration wells compared to 2015.

Mr Brown will tell delegates at the key industry-body conference that the UK Government must take action by considering how to best encourage exploration via the provision of fiscal support.

He will also highlight the lack of progress made by the UK Government on the commitment made in its March budget to use the UK Guarantees Scheme for oil and gas infrastructure to secure new investment in assets of strategic importance.

Mr Brown will say:

“The Scottish Government is engaging closely with the industry, trade unions and regulator to overcome the current challenges to ensure a long term future for the sector.

“However, the UK Government retains control of the key taxation levers affecting the sector and must take the action needed to protect businesses and jobs. Although the fiscal changes announced in the March budget were welcomed, it was ultimately a missed opportunity as a number of challenges remain.

“One of the most critical is exploration. Exploration is the future life-blood of the industry, without which we will never realise the 20 billion barrel potential of the North Sea. Higher rates of exploration are crucial if we are to maximise economic recovery and avoid premature cessation of production.

“Exploration levels, however, currently sit at an all-time low, with recent projections for 2016 estimating half the number of wells compared to 2015.

“While funding for seismic surveys will have long term benefits, further support must be provided for exploration and, indeed, enhanced oil recovery. With costs much lower and spare capacity in the market, it is now the time to undertake exploration activity.

“This view is backed up by the latest Bank of Scotland survey indicating that more than half of all companies want to see a basin-wide fiscal stimulus to encourage exploration and preserve the stimulus to late-life fields.

“In the Spring Budget, the Chancellor also committed to consider loan guarantees. Access to finance continues to be considered one of the greatest challenges in the basin, but we have heard no further details since the Budget on these critical issues. The UK Government must provide more clarity on their use - they could potentially be used to ensure critical assets and infrastructure remains operational, preventing systemic risks.

“The UK Government must not consider the last Budget to be job done. Further fiscal support for exploration is needed now.”