$50 oil prices could lead to the early decommissioning of North Sea facilities and the loss of 6bn barrels of oil

In a stark warning to the Government over the future of the North Sea, one of the oil industry’s leading figures, has warned that 6bn barrels of oil reserves – a third of what remains under the seabed – worth £200bn may be abandoned unless radical steps are taken to reform the tax regime for offshore drilling.

In an interview with The Sunday Telegraph in Aberdeen, Sir Ian Wood, a billionaire Scottish oil expert, said: “The danger is that if we lose momentum now and lose recourses and assets, and don’t get the fiscal regime fit for a quite highly mature area, we will come down to 10-11bn (oil reserves). That’s a huge economic loss and jobs loss for the UK.”

In a report for the Government published last year on how to maximise recovery of oil from the North Sea, Sir Ian said that the estimated reserves that could still be produced from the province were in excess of 16bn barrels of crude. However, Sir Ian – founder of Wood Group, one of the UK’s largest oil and gas engineering companies – now believes there is a danger that $50 oil prices could lead to the early decommissioning of North Sea facilities and the loss of 6bn barrels of oil. The move would mean a potential £200bn loss to the British economy in revenue and investment.

The Chancellor George Osborne is under pressure to deliver a package of tax cuts and incentives such as directly funding exploration work in the North Sea when he presents his final budget of the current Government in March. Around 450,000 jobs are directly supported in the UK through the oil and gas industry, which is mainly centred in the North East of Scotland around Aberdeen.

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Source: Sunday Telegraph