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UK Oil Industry Needs Investment and Political Support to Halt Output Decline

The UK could be producing 30% more oil from the North Sea in 2030 than previously expected if investments worth some $25 billion (20 billion pounds) are deployed for that purpose.

This is according to Offshore Energies UK, formerly Oil and Gas UK, the industry group that earlier today published its Economy & People Report 2024. In the report, the authority also said that with the right political support investment in what it calls offshore energy could rise to over $25 billion from $16.5 billion in 2023.

The offshore energy that OEUK talked about included oil and gas, hydrogen, carbon capture, and offshore wind power.

“With supportive policy, the industry can deliver enduring economic value, scale up our supply chain capacity, sustain skilled jobs, deliver energy security, all while delivering on our climate goals,” Offshore Energies UK said.

The UK is currently producing some 1.2 million barrels of oil equivalent but this will fall steeply to just 700,000 barrels daily by 2030, according to forecasts by the North Sea Transition Authority—the industry regulator, as cited by Bloomberg.

According to Offshore Energies UK, the decline could be softened to 900,000 bpd if investments keep flowing into the industry, a 30% increase on current estimates. Yet for that to happen, oil and gas operators in the North Sea need a hand from the government.

They are, however, unlikely to get that hand if the next government is Labour, which appears to be the case per recent polls that predicted “political extinction” for the Conservatives. There has been little difference on energy transition matters between Labour and Conservatives but the latter have signaled some support for continued oil and gas production, and even new exploration licenses.

Labour, on the other hand, plans to hike taxes for the industry even higher if it wins the vote, and it also promised its voters to cancel new exploration licenses. In a further blow to the industry, a Labour government would scrap a tac inventive dubbed investment allowance that exempts profits from taxes as long as they are reinvested in production.

By Charles Kennedy for Oilprice.com

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