Oil firms must improve production efficiency, warns OGA

Will Green is news editor of Supply Management
14 September 2015

Recent oil price falls have increased the risk of the “premature decommissioning of critical infrastructure” in the UK, according to the Oil and Gas Authority (OGA).

In a report the OGA said there was risk of a “domino effect” that would damage the supply chain and make future developments more expensive.

The report, marking six months since the creation of the OGA to tackle the challenges faced by the UK oil and gas industry, calls on firms to “significantly improve production efficiency”.

“The significant fall in production efficiency and sharply rising costs have left the UK oil and gas sector particularly exposed to the drop in oil price,” said the report.

“It is now widely recognised that a transformation in the way business is done is required if the sector is to become more resilient and competitive in a world of sustained lower prices. While there are some signs that this transformation has begun, further concerted action is essential.”

OGA said oil and gas operations were served by a UK supply chain of around 375,000 jobs and £35 billion annual turnover. However, since late 2014 5,500 jobs have been lost due to the falling oil price, said the report.

The report said the £1.3 billion of support announced by the government in the budget “provided a welcome boost” and would “incentivise £4 billion of additional investment”, leading to a 15 per cent production increase by 2019-20.

Andy Samuel, OGA chief executive, said: “Our oil and gas industry supports around 375,000 jobs, provides secure energy for our homes and businesses and generates billions of pounds for our economy every year, at home and through exports overseas.

“Government, industry and the OGA must continue to work together to increase the competitiveness of this vital sector and maintain the significant benefits it brings to the UK.”

Under the Energy Bill, currently passing through the House of Lords, the OGA will become an independent regulator with the power to impose sanctions on firms.

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