Page last updated at 22:17 GMT, Wednesday, 28 May 2008 23:17 UK

Brown urges increased oil supply

Gordon Brown
Gordon Brown wants oil companies to increase production

Gordon Brown has urged oil industry leaders to come up with ideas for improving supplies as fuel costs soar.

The government has announced moves to increase North Sea oil production but Energy Minister Malcolm Wicks said they would have no impact on fuel prices.

Lorry drivers have staged protests against rising costs and Labour MPs have urged ministers to rethink increases in both petrol and road tax.

The PM, who met industry bosses, warned that high oil prices were here to stay.

As the talks began, Business Secretary John Hutton announced the go-ahead for oil production to start in two new fields, West Don and Don South West.

20,000 barrels

The areas are expected to start operating in the first half of next year with an estimated production rate of up to 50,000 barrels of oil a day at their peak and a total output of 50 million barrels.

Mr Hutton also unveiled plans for new oil and gas fields to be carved out of unprofitable parts of around 30 existing fields, which could see additional daily production of 20,000 barrels of oil.

This is not just a national problem - it is a global problem of supply and demand, not just in the short term, but the medium term and the long term
Gordon Brown

A record 193 applications have been received to explore for oil and gas in the latest licensing round.

After the meeting in Banchory, near Aberdeen, Mr Brown said: "We want to do more to increase production in the North Sea and we have made proposals today that I believe will incentivise, not only existing fields, but new fields, to come on stream."

However, Mr Wicks said the measures were "not going to affect prices today or next week" and he dismissed suggestions the announcement was a gimmick designed to distract attention from the political row over fuel prices.

He conceded that ministers had been working on this licensing round involving the Don Fields for more than three years.

Shadow business secretary Alan Duncan said Gordon Brown had announced nothing new.


He told BBC News: "He says he's going to increase North Sea production - that's going to happen anyway, it won't happen for a couple of years, it's only 50,000 to 70,000 barrels.

"He speaks about Opec cutting prices by increasing production - they're not going to listen to him and they're not going to do it anyway. He talks about nuclear power stations - they're 10 years away."

Alex Kemp, professor of petroleum economics at Aberdeen University, warned there was no short-term solution for increasing production in the North Sea, saying one could not simply "turn on the taps".

OIL & GAS FACTFILE
Around 280 oil and gas platforms around UK, mostly in the North Sea but some to the west of England
Run by companies including BP, Maersk and Shell
UK oil and gas industry worth around 30bn a year
Production of oil and gas from UK continental shelf was 2.9 million barrels per day in 2006
The industry contributed 9bn in direct taxation to Exchequer in 2006
The UK was self-sufficient in oil for 25 years to 2005, with local production satisfying 96% of demand in 2006
The UK is fourth largest gas producer in the world and is 15th largest oil producer
Total employment by oil and gas sector in UK estimated at 480,000 in 2006, of which 380,000 in domestic production
Some 25 billion barrels of oil and gas are still to be recovered

And environmental group Friends of the Earth said the government should be developing urgent plans to wean us off our addiction to fossil fuels, rather than increasing oil production.

The government is under mounting pressure to ditch controversial plans to increase road tax on gas guzzling cars.

Mr Hutton and Justice Secretary Jack Straw insisted the prime minister was "listening" to concerns over the planned increase in vehicle excise duty - giving rise to speculation that the government could stage a U-turn.

However, the prime minister's official spokesman said the two cabinet ministers were saying "nothing more than the government understands the concerns of the motorists and hauliers".

"The chancellor and the prime minister would happily agree with them," he said, adding that Mr Brown was not going to retreat from "his green agenda".

The prime minister has called on nations to unite to stabilise the price of oil, which has increased from US $10 a barrel a decade ago to $135 today.

He says the UK will argue that a global strategy to tackle the impact of higher oil prices be put at the top of the agenda of the next meeting of the G8 group of industrialised countries.

Grangemouth Oil Refinery, west of Edinburgh
Some oil experts are sceptical about increasing production in the North Sea

Lib Dem treasury spokesman Vince Cable, a former economist at oil giant Shell, said if he were chancellor he would wait until autumn before making a decision on the 2p fuel duty rise - but added he could not see an easy way to pay for scrapping it.

HAVE YOUR SAY
Why won't Brown just accept that he puts too much tax on fuel?
Danny, Essex

On Tuesday the Treasury defended its plans to increase duty on more polluting cars registered since 2001 by as much as 200, saying this would increase the incentive to develop and purchase fuel-efficient cars.

So far, 42 MPs have signed a Commons motion asking Chancellor Alistair Darling to reconsider the policy on the grounds that it is retrospective and "unfair" to people who have already bought their cars.

Mr Darling is due to meet backbenchers next week to discuss their concerns.

Graphic illustrating how price of litre of fuel breaks down




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