Engineering news
Changes to the way the oil and gas sector operates could produce at least three to four billion additional barrels of oil over the next 20 years, a report claims.
A review of the industry, by Sir Ian Wood, the recently retired chair of the Wood Group, has called for a new focus on maximising the potential of the UK Continental Shelf (UKCS) waters around the UK.
The interim report recommends a new regulator for the industry, saying the current one is "no longer adequate" to meet the challenges of managing an "increasingly complex" sector.
The new body should, as a priority, work with the industry to develop strategies for exploration, technology including enhanced oil recovery and carbon capture and storage, and decommissioning, the report says.
Implementing the recommendations has the potential to produce "at least" the equivalent of an extra three to four billion barrels of oil from the UKCS, worth approximately £200 billion to the UK economy, the report says.
The equivalent of 41 billion barrels of oil have already been produced from the UKCS, with an estimated equivalent of 12 to 24 billion barrels still to come. "Ultimate recovery is in a large part dependent on how well the UK manages the development of remaining reserves," the report insists.
The sector faces a number of challenges in the future, with any newly discovered oil and gas fields generally smaller and harder to exploit, while some of the operating equipment is more than 30 years old and is now at or beyond the end of its original intended lifespan.
Production has fallen by 38% in the last three years, resulting in £6 billion less in tax receipts for the Treasury, while a decline in exploration led to the equivalent of less than 50 million barrels of oil being discovered last year.
Sir Ian said "The UKCS has changed radically over the last 20 years. While some regions are mature, there are still frontier areas and significant emerging potential where technology is opening up important new plays. It is therefore an opportune time for Government and the Industry to take stock and reshape the stewardship regime that will be required for the decades to come".
The report says that there is is a "lack of focus on maximising economic recovery for the UK" because operators have pursued individual commercial objections in isolation, with only a limited shared commitment to maximising recovery across parts of the UKCS, according to the report.
It also claims that the current regulator, part of the UK Government's Department of Energy and Climate Change, is "significantly under-resourced and far too thinly spread to respond effectively to many of the demands of managing an increasingly complex business and operating environment".
Energy Secretary Ed Davey said: "Today's report shows that with strong, co-ordinated stewardship by the UK Government, working in partnership with world-class operators, we can boost future returns by at least £200 billion, and potentially much more.
"This report has given Government and industry alike plenty to think about, and I'm looking forward to receiving Sir Ian's [full] report and setting out our plans to make the most of our offshore oil and gas fields in the new year."
The final report is expected to be published in the New Year. It is the first independent review of the oil and gas industry for 20 years. The UK Government charged Sir Ian in June with looking at how best to ensure the longevity of the UK oil and gas industry.