British oil and gas group pleads for government support amid declining investments in the North Sea. File Photo by Maryam Rahmanian/UPI | License Photo
LONDON, Nov. 7 (UPI) -- The British government needs to step in to help ease the pressure on investments in the North Sea brought on by lower oil prices, a trade body said.
Lower crude oil prices, relatively unchanged from one year ago, but more than 40 percent below the level from two years ago, have forced some oil and gas companies to cut back on exploration and production activity.
Deirdre Michie, the chief executive of trade body Oil & Gas U.K., said in a statement the North Sea sector was working to counter a lack of investor confidence.
"Exploration and development drilling has fallen to record lows and industry figures reveal a drought of new investment approved in 2016 and 2017 looks no better," she said
Two years ago, Michie's group said total investments in oil and gas opportunities in British waters were around $18.5 billion, but declined to around $11 billion this year.
Last than two months ago, Oil & Gas U.K. said the British oil and gas industry has been resilient in the era of lower crude oil prices. Costs have declined by up to 50 percent, while output since 2014 has increased 10 percent. Nevertheless, the industry has seen steep losses in revenue and more than 100,000 jobs have been lost since 2014.
Michie's group said companies have started to grow accustomed to a market where crude oil is trading in the upper $40-per-barrel range, but the British decision in June to leave the European Union is something of a distraction for an economic sector that depends in part on external markets for success.
She called on British Chancellor of the Exchequer Phillip Hammond to use his upcoming autumn statement, one of two statements on the state of the British economy, to drive new investments to the North Sea in part by offering tax relief for companies that do business there.
"Sentiment and stability are important, and the chancellor has a real opportunity to use the autumn statement to send a clear message to investors that the U.K. continental shelf is a great place to do business," she said.
The British government in August reported total production of all energy reserves increased 4.4 percent from the first quarter of 2015. Total imports of energy products declined 8.8 percent during the same period.