Deloitte Reports on UK Shelf Boost
New tax allowances and a high oil price boosted drilling activity on the UK Continental Shelf (UKCS) by one third in 2012, according to a new report by Deloitte, the business advisory firm.
The report on drilling and licensing activity across North West Europe for 2012 shows 65 exploration and appraisal wells were drilled on the UKCS in 2012, marking a 33% increase on last year’s total of 49. This compares to lower drilling activity levels reported in Norway in 2012, down by 19% when compared to the previous year.
A range of other key indicators suggest positive prospects for the sector in 2013, following a range of tax breaks introduced by the UK Government to stimulate activity in the North Sea during 2012.
Last year also saw a surge in deal activity (where oil and gas fields are bought and sold), Deloitte's Petroleum Services Group (PSG) notes. Across North West Europe, 129 deals were announced, 80 of which took place in the UK. This equates to a 30% increase on the UK’s 2011 deal figure. These were split almost equally between farm-ins – companies taking a stake in another company’s field – and deals to purchase oil and gas fields, at 40% and 43% respectively. This compares to 64% of all deals in 2011 being farm-ins and deals to purchase fields only representing 14%. The fact that companies are buying more fields outright is another indicator of rising investor confidence.
Interest in field development also reached a 10-year high. Britain's Department of Energy and Climate Change (DECC) granted 21 field development approvals, and eight incremental projects – investment in older fields for redevelopment – were sanctioned. Last year was also the fourth consecutive year in which steady growth in field development approvals was reported.
Graham Sadler, managing director of Deloitte’s PSG, said: "After several years of caution and uncertainty, we have a more positive environment, where a number of factors such as tax incentives, high oil price and appetite to invest have combined to make 2012 the most encouraging year for a long time. The government introduced a range of tax reliefs which have sufficient breadth and depth to create an environment in which companies of all sizes and investors have the confidence to take some risk and expand their operations in the North Sea."