19-07-05 First the good news, then the bad. Oil officials at the UK's Department of Trade and Industry (DTI) were basking in glory. More companies had made bids to drill for oil in the North Sea in its latest licensing round than had done so for the past 30 years.
Then BP's annual energy review, out the same day, spoiled it all by revealing that production in the UK dropped faster last year than in any other country in the world except Australia.

The round was a stunning success, almost a return to the heady days of the 1970s, when the North Sea was the number one hot spot for the international oil business. Some 279 companies made bids, almost double the number that made applications in the previous round.
A healthy 28 of the bids came from companies that had never bid in the North Sea before. All the international oil majors applied for blocks and the number of tiny start-up oil companies involved was startling.

But why are they willing to throw more money at exploring in an oil basin where production shrinks faster every year?
The 10 % fall in production was a change from the annual 8 % fall off seen since production peaked six years ago. The decline in gas output has also taken onlookers by surprise, which is part of the reason UK gas prices have hit such highs. Britain's 6.7 % drop in gas production was rivalled only by reductions in New Zealand and Denmark.

To an extent, it's the oil officials at the DTI who should get the credit. The UK Government has been bending over backwards to stimulate the industry, recognising that the more of the remaining oil is eked out, the more tax will be collected for the Treasury.
The DTI has launched licences to attract new entrants big and small, companies whose size or business strategies make it worth their while investing in a mature oil province.