Page last updated at 12:01 GMT, Tuesday, 23 February 2010

UK Oil and gas reserves higher than thought

Offshore platform
Oil and Gas UK said supplies could last for decades

Britain has more oil and gas under its waters than previously calculated, according to an annual survey of the offshore industry.

Despite the number of fields in production falling, the past two years has seen a 60% increase in estimates of untapped reserves.

Industry body Oil and Gas UK said urgent infrastructure improvements were needed to exploit the reserves.

It has called for £25bn of capital spending over the next five years.

The organisation, which lobbies the UK government for a tax regime that helps it to spend on hard-to-reach resources, said it was increasingly difficult to turn new reserves into economic production, particularly since the wholesale price of gas had been so volatile.

Having surveyed more than 70 companies, it found its members believe up to 25 billion barrels of oil remain to be won from British waters.

We now need to work together to extend that process to encompass other new and existing fields and positively encourage investment in this vital UK energy industry
Mike Tholen
Oil and Gas UK

Business plans in the second half of 2009 identified up to 11 billion barrels of oil and gas in new and existing projects, a 15% increase over 2008.

That would require total capital expenditure of £60bn.

If that is spent, the industry believes it could still be providing 1.5 million barrels a day in 2020 - half of the UK's total demands.

The UK's proven reserves in existing and approved projects stands at 5.25 billion barrels, down from six billion barrels in the last survey.

Meanwhile, those classes as "probable" or "possible", which have not yet attracted investment approval, increased by 60% to about six billion barrels.

The UK produced nearly 2.5 million barrels a day during 2009, down 6% on the previous year, reflecting the 20% slowdown in capital expenditure since 2006.

However, the survey showed plans for capital spending could pick up in 2010, from £4.7bn last year to more than £5bn.

'Energy supplies'

With finance squeezed and oil prices much lower in 2009 than the previous year, the number of wells drilled dropped by 22%, to 130 wells.

Exploration and appraisal drilling fell by 40% to 65 wells. There were only six new fields whose licensees sought government approval for development.

The rise in untapped reserves was shown by 73 potential new field developments, compared with 56 at the end of 2008.

However, the 17 new fields in this year's survey are, on average, 20% more expensive on a cost per barrel, as they are in harder-to-reach areas, including the west of Shetland.

Mike Tholen, economics director of Oil and Gas UK, said the survey findings were encouraging, and confirmed the belief that the industry has decades yet to flourish.

Malcolm Webb, the organisation's chief executive, said government should lower production tax and reduce the burden of regulation.

"The UK's oil and gas industry can help secure energy supplies for decades to come," he said.

"The government has taken several welcome steps over the last 18 months in reducing the rate of tax on various types of new fields.

"We now need to work together to extend that process to encompass other new and existing fields and positively encourage investment in this vital UK energy industry."

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