Offshore staff

LONDON, UK --The average cost of developing new oil and gas reserves in the UK fields last year rose to $25/bbl, according to the latest Economic Report from operator/contractor association Oil & Gas UK.

Chief executive Malcolm Webb said oil accounts for 55% and gas 45% of UKCS production, so the recent fall in gas prices is hitting producers' revenues. Industry competitiveness is slipping, he added, and the struggle to attract new investment to the shelf is intensifying.

This trend is evident in the shelving of several projects vulnerable to low gas prices in the southern and northern North Sea, where aging infrastructure exacerbates operating costs.

Webb called for a more competitive fiscal and regulatory regime to attract the investment needed, so that the sector can at least provide 25% of the UK's gas and 60% of its oil in 2020. Recent tax increases, he said, had actually caused government revenues from the sector to fall below a projected $22.17 billion this year to a probable $16.12 billion.

07/04/2007