Oil and gas production in the North Sea’s more marginal fields is likely to increase after chancellor Alistair Darling announced incentives to support investment in his Budget statement.
Precise detail was scant, but according to the Red Book the Treasury is investing £5 million this year and £10 million next in promoting the extraction of two million barrels from less profitable wells.
The extra reserves will in turn bring much needed tax revenue into the Treasury which is facing a deficit of a monumental £175 billion this year alone, although there were no projections of how much the move is likely to yield.
The news will be welcome in Shetland, where oil and gas related activity, particularly in the harbour, has declined in the last six months.
Malcolm Webb, chief executive of the industry’s umbrella body Oil & Gas UK, said: “We acknowledge this demonstration of the Government’s commitment to the future of this industry in the UK.
“The measures announced are a positive step for those companies trying to develop small and challenging fields in this mature, high cost province. However, we now need to direct our attention to sustaining and promoting investment in and around many of our older fields to prolong their lives, to stimulating exploration activity and to opening up the frontier areas west of Shetland and in that regard, we welcome the Government’s offer of a continued dialogue.”
He added: “We must not forget that a number of small companies involved in exploration, the ‘lifeblood of the industry’, are suffering severely from the lack of access to equity markets and we regret that the chancellor did not act on our recommendations to improve funding of this crucial activity.