By Sarah Young
LONDON, March 28 British oil group BP is
pressing ahead with a $500 million-plus investment in the
Shetland Islands, a shot in the arm for the government's efforts
to revive the North Sea oil industry to help kickstart a
Though North Sea output has fallen by about two thirds since
2000 and a surprise tax increase in 2011 led to dire predictions
about its future, industry body Oil & Gas UK in February
forecast a pick-up in production from 2014, fuelled by renewed
government support and a surge in investment.
BP's investment, which could pave the way for a big add-on
project at its Clair field, coincided on Thursday with a
government effort to boost investment in the oil and gas sector.
Business Minister Vince Cable and Energy Secretary Ed Davey
will travel to Aberdeen, known as the oil capital of Europe,
where they will pledge government commitment to a stable tax
regime for the industry, and announce plans to develop Britain's
supply chain further and try to plug an engineering skills gap.
Under BP's plans, it will drill at least five appraisal
wells in the giant Clair field off the west coast of the
Shetland Islands, north of Scotland, to discover whether it is
worth further development.
BP and its Clair partners, Shell, ConocoPhillips
and Chevron, in 2011 said they were investing
4.5 billion pounds in a second phase of development for the
field, which first started pumping oil in 2005.
"If successful, the appraisal programme could pave the way
for a third phase of development at Clair - this is now a real
possibility," BP's North Sea regional president Trevor Garlick
said in a statement.
Big oil companies have tended to look beyond the North Sea
in recent years, favouring new oil provinces with more
potential, but the rich geology of the areas around the Shetland
Islands has kept them hooked.
The British government has been at pains to reclaim the
trust of oil and gas industry after the 2011 shock tax rise.
New tax breaks, for older oil fields, heavy oil fields,
deep-water fields and clarity over field abandonment tax relief
have over the last two years helped give companies the
confidence to move ahead with new plans.
BP's plan for Clair follows other recent new investments in
the North Sea, including a $7 billion project announced by
Norway's Statoil in December and a 1.6 billion pound
($2.4 billion) investment by Canada's Talisman Energy
two months earlier.
"This is an expanding industry. We can either help create
more jobs and opportunities across the UK if we get this right
or see work going overseas if not," Business Minister Vince
Cable, who once worked for Shell, said in a statement.
Britain's oil and gas industry contributes more to
government coffers than any other sector and paid over one fifth
of total corporation taxes in 2012. It also employs over 400,000
people including its supply chain.
The government said it will invest 7 million pounds to
establish a new centre for subsea engineering and help the
industry by establishing a programme to retrain ex-military
personnel to work in oil and gas.
BP, which has the biggest stake in Clair at nearly 29
percent, said that it had already started drilling the first
appraisal well and it could complete up to 12 wells over two
years, depending on the results of the first wells.