North Sea tax grab blamed for record slump in UK oil and gas production

UK natural gas production in the third quarter of 2011 slumped to the lowest level since records began in 1996, at 103TWh (terawatt hours), Department of Energy and Climate Change (DECC) data show. This also represented the largest year-on-year quarterly decrease ever seen, down 29.4pc on the same period last year.

Mike Tholen, Oil & Gas UK?s economics director, said: ?Production through to September 2011 has fallen dramatically, by much more than had been anticipated by either industry or Government immediately prior to the Budget.

?The drop can be attributed to a combination of factors including extended shutdowns for maintenance and lower gas demand. However, looking further back, fiscal instability since 2002 resulted in fewer new fields coming onstream over the last few years and it appears that this may have been compounded by a direct commercial impact on production following the tax increase in March.

?These production figures demonstrate the importance of sustaining investment throughout the price cycle, which is made much more difficult in a fiscal environment without long-term certainty.?

Mr Tholen added: ?For the sake of the UK?s economy and its energy security, the UK Continental Shelf must, and can, recover from this production fall. In this, the ongoing work of Oil & Gas UK?s members and the Government to improve the business environment for investing companies and deliver long-term certainty is hugely important.?

A spokesman for DECC said: ?Production levels during 2011 have been lower than previously anticipated due to shutdowns in this summer?s maintenance programmes coinciding.

?There is no reason to believe that the production decreases are a result of concerns over tax. In general, North Sea production is continuing to decline year-on-year, however we do not believe the recent downturn is the start of an additional downward trend and we would anticipate overall production levels beginning to improve in the spring.?


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