Outlook for the UKCS in 2007

UKCS Players and Commercial Activity

The importance of encouraging a diverse range of new companies into a mature province is highlighted in Figure 41, which shows the growing and now very significant contribution that new entrants have made since 1999, both in terms of expenditure and production.

Figure 41: New Entrants’ Contribution to Production & Investment 1999-2006

The growth of this sector is not guaranteed though, especially if asset trading with new entrants falls. Asset trading dropped dramatically in 2006 with only 17 deals reported by year end, half the number seen in 2005. This is a historic low and, significantly, for the second year running no new entrants were attracted into the UKCS.

Figure 42: Buyers of UKCS Assets 1995-2006

The active trading of assets is a strong reflection of commercial competitiveness. High oil and gas prices have undoubtedly made initiating the decision to sell more difficult. However, uncertainty regarding the fiscal and regulatory treatment of decommissioning is cited by all deal parties as a significant barrier to trading assets. Prompt action needs to be taken to address the fiscal and regulatory issues, particularly to provide certainty on the future tax treatment of decommissioning costs and to avoid the regulatory framework for decommissioning from becoming a barrier to the sale or purchase of assets.

Figure 43: UKCS Asset Transfer and Oil Price 1993-2006