UK sets tough new investment rules for North Sea licences

Mar 06, 2002 01:00 AM

The British Government has set tough new investment rules for North Sea licences in a bid to slow the decline in output after a 30-year bonanza. Energy Minister Brian Wilson said more demanding conditions would force companies to invest or face losing existing licences to other investors who were willing to squeeze the shrinking oil reserves.
"It is essential to have the right licences in the right hands at the right time. We are moving towards that objective on a very encouraging consensual basis," Mr Wilson said.

The new rules, agreed with industry body Pilot, set new investment deadlines on existing licences, make trading licences between companies more transparent and set shorter investment deadlines in new concessions. North Sea oil and gas discoveries are now much smaller than the giant finds of the 1970s and 1980s, and the region's resources are dwarfed by areas opening to foreign capital in Africa, central Asia and the Middle East.
Production of North Sea oil and gas peaked at around 3 mm boe in the late 1990s, and dropped to an eight-year low in 2001. Investment in the North Sea has dropped by half since 1998, when oil prices crashed to about £ 3 bn per year. Despite higher world oil prices since 2000, spending has failed to recover fully. Under the new voluntary code, exploration and development licences will be deemed fallow if no activity has taken place for four years.

Mr Wilson recently estimated that Britain had 250 fallow discoveries and another 200 unused licences. After the four-year deadline, companies with fallow discoveries will have 27 months to start investing or face losing the licence, while those with fallow blocks will have 15 months.

Source: Edinburghnews.cfm
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