Soaring costs put pressure on North Sea

Soaring costs put pressure on North Sea

By Andrew Bolger, Scotland Correspondent

Published: May 28 2008 23:28 | Last updated: May 28 2008 23:28

The North Sea oil and gas industry is caught in a painful pincer movement between rapidly soaring costs and steadily declining reserves.

To date, the equivalent of 37bn barrels of oil have been extracted from the UK Continental Shelf (UKCS). That leaves up to 25.5bn barrels still to be recovered.

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Oil Producers Answer Calls For Action
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The world's leading oil producers say the black stuff is too expensive and they plan to increase supplies to help ease the global fuel crisis.

A source at Opec said its 13 members were uncomfortable with the current price of crude, which last week hit a record $135 a barrel.

Based on present supply and demand, he said it should be fetching $60-$70 a barrel.

Saudia Arabia has indicated it will increase supply to drive the price down.

Experts say oil has been driven to its present level by speculators who see it as a safer haven for their money than the weak dolllar.

Earlier, Gordon Brown said the oil crisis is a global as well as a national problem and asked the UK gas and oil industry to help.

"This is not just a national problem," he told a meeting of industry representatives.

"It is a global problem of supply and demand, not just in the short term but the medium term and the long term."

Mr Brown said the key issue facing North Sea producers now was how to maintain supply for the "next few years".

Britain has so far produced 37 billion barrels of oil and gas and it is estimated there are another 25 billion barrels available.

Writing in the Guardian Mr Brown called on nations to unite to stabilise the price of oil, which used to be just $10 US a decade ago.

On Tuesday, lorry drivers delivered a petition to Downing Street calling on the Government to help save the haulage industry by reducing the duty on diesel.

Ministers are also under mounting pressure to ditch controversial proposals to increase road tax on gas guzzling cars.

In his article, Mr Brown acknowledges the public's concern about the impact the rising oil price is having on transport and fuel bills.

He said the UK is arguing for a global strategy to address the impact of higher oil prices and was pressing for this to top the agenda at the forthcoming G8 summit in Japan.

Mr Brown said the best long-term solution for consumers and the environment would be a radically different energy policy.

He writes: "We need to accelerate the development and deployment of alternative sources of energy, reducing global dependence on oil."

He said Britain will invest more in renewables and build more nuclear power stations to reduce the UK's CO2 emissions and dependence on fossil fuels.

Meanwhile, Business Secretary John Hutton outlined plans for increased North Sea oil production with the creation of two new fields.

The new West Don and Don South West developments are due to start production in the first half of next year.

At their peak they are expected to produce up to 50,000 barrels of oil - 50 million barrels in all.