* UK could lose out on 200 bln pounds without new rules
* Industry to bear brunt of regulator cost
* Govt to appoint head of regulator this summer
By Karolin Schaps
LONDON, Feb 24 Britain said it would create a
new oil and gas regulator which will help UK explorers speed up
their search for hard-to-access fossil fuel resources in a bid
to counter plunging North Sea production rates.
A government-commissioned report published on Monday said
Britain could lose out on a potential 200 billion pounds ($335
billion) worth of oil and gas output if measures proposed in the
report are not followed.
The country's oil and gas output has fallen around two
thirds since its peak at the turn of the century, but up to 24
billion barrels of oil equivalent (boe) are expected to still
come out of the ground.
Oil and gas companies active in the UK's Continental Shelf
(UKCS) are expected to meet most of the costs of a new oil and
gas regulator that will speed up licensing processes, help
coordinate exploration data and enforce rules to maximise well
Running a new regulator is estimated to cost 20-30 million
pounds a year, a small amount compared to revenues oil and gas
explorers make from selling fossil fuel.
The government's decision to create a dedicated regulator
follows a recommendation in the oil and gas sector's first
review since the mid-1990s, also known as the Wood Review.
The North Sea is thought to contain billions of barrels of
hard-to-reach oil but with many platforms and pipelines coming
to the end of their working lives, time is fast running out to
get at them. The review's task was outlining how to make that
Big players in the oil and gas industry, such as BP,
Statoil or Shell, welcomed the creation of a
Industry and government are still discussing the exact split
up of the costs to run the body, with a decision expected by the
summer, a government spokeswoman said.
"These are matters for the whole industry and we will be
working with other operators, the government and the regulator
to look closely at the details and practical implementation of
today's report," said a spokesman for Shell.
Industry experts say the cost to companies is dwarfed by the
benefits a smooth-running regulator would offer.
"I believe industry will have to pay, but in return should
be granted appropriate service level agreements," said Sir Ian
Wood, author of the review and former chairman of oil services
company Wood Group, without providing figures.
SENSE OF URGENCY
Government revenues from North Sea production fell more than
40 percent to 4.7 billion pounds in 2012-13, underlining the
sector's importance to Britain's economic recovery.
The government's aim to appoint a chief executive to run the
regulator this summer shows that tackling the decline in oil and
gas output is an urgent matter, said Judith Aldersey-Williams,
partner at law firm CMS.
"That suggests a real sense of urgency and I think that's
quite encouraging," she said.
The new regulator will block any major investments that do
not sufficiently focus on extracting maximum potential from
North Sea fields, a move which could result in some operators
losing their licences, Wood said.
Wood, whose report estimates that about 24 billion barrels
of oil equivalent could still be buried beneath the UK part of
the North Sea, also recommended the regulator should enforce
rules for companies to share exploration data more quickly.
"I fully back Sir Ian Wood's recommendations and we will
start implementing them immediately," said Britain's Energy and
Climate Change Secretary Ed Davey in a statement.
A focus on more drilling for oil and gas in more remote
areas could benefit companies which specialise in exploration
such as Seadrill, Noble or Rowan.
"We strongly welcome the proposal for a new arm's length
regulator with additional powers and resources...The report is a
game changer," said Malcolm Webb, chief executive of Oil & Gas
UK, Britain's fossil fuel industry lobby group.
Britain's plan to squeeze more oil and gas out of its mature
market could be a blueprint for other countries whose
exploration programmes are yet to reach this stage.