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North Sea oil, gas exploration plummets

oil-platformA steep drop in the number of exploration wells being drilled in the North Sea might require industry and Government action to ensure stable future energy supplies for the UK, according to new figures from Deloitte.

Those figures show a 78 per cent drop in exploration wells drilled in the UK Continental Shelf (UKCS) during first quarter of this year, compared to the same period last year.

“The decrease in activity in the UKCS can be wholly attributed to the sharp drop in exploration drilling as oil and gas companies reassess their priorities in light of the difficult economic conditions,” said Derek Henderson, senior partner for Deloitte in Aberdeen. “Cash continues to be a priority as credit conditions remain extremely tough for organisations in the UK, despite the recent base rate cuts.  The evidence so far is that these have had little impact on the cost or the availability of new credit generally which is constraining activity levels throughout the industry supply chain  Access to the equity markets is also restricted.”

A Financial Times article warned the current decline in exploration puts the UK at risk of seeing oil and gas production from the North Sea cut in half.

Henderson said he hoped current steps being taken by industry and the Government could help minimise that risk.

“Investment, a supportive tax regime and stimulation of development capital are vital to trigger a rise in exploration and drilling and ensure the long term security of the UK energy supply,” he said.

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