I am a strong believer that in almost every scenario, we are stronger when we work together in collaboration with others in pursuit of a common goal. Reflecting on 2011, it is clear that in this way, presented with some rather heady challenges, Oil & Gas UK has succeeded in helping the industry to achieve positive conclusions which will serve to improve the business environment, drive health and safety and enhance environmental protection.
Instrumental in this has been partnerships with our member companies and other organisations such as the Department of Energy and Climate Change (DECC), the Treasury, the Health and Safety Executive (HSE), parliamentarians and trade unions. It is crucial that we nurture and maintain these relationships as many of the issues we worked on throughout 2011 will continue to pose challenges in 2012.
Following the dismay of the unexpected tax increase and capping of relief on decommissioning costs announced in the March Budget, Oil & Gas UK quickly surveyed our members in order to quantify the likely effect on investment, production and tax revenues so that we were in a position to explain how the tax changes had damaged investor confidence and consequently oil and gas exploration and production, the UK's energy security, employment and tax revenues.
We end 2011 in close discussion with the Treasury on ways to stimulate investment in marginal fields and resolve uncertainty around tax relief on decommissioning costs by 2012's Budget, and with a Government commitment to consult the industry on the tax regime in future via the new Treasury-industry forum, PILOT, which is charged with enabling the maximum recovery of the UK's oil and gas resource, has regained direction and in 2012 its work will focus on access to capital, critical infrastructure and increasing production.
During 2011 we also made progress in gaining recognition of the key role that natural gas will continue to play in meeting the UK's energy needs for many decades to come. Secretary of State for Energy, the Rt Hon Chris Huhne MP, told the House of Commons in his annual energy statement that ''gas will continue to feature strongly in our energy mix and our policies are designed to allow new gas plant to be built''. The effort to raise the profile of natural gas as an affordable, technically feasible and environmentally sound way to meet the UK's energy needs must continue in 2012, so that investors are given the the certainty they need to have sufficient confidence in the UK market to invest the billions of pounds required.
Following the Gulf of Mexico oil spill in 2010, a major challenge with which the Uk oil and gas industry was faced was to prove that the public should have confidence in its operations and that it should retain its licence to operate and be permitted to continue to develop the nation's oil and gas resource. Soon after the Macondo incident, Oil & Gas UK established the UK's Oil Spill Prevention and Response Advisory Group (OSPRAG), bringing together the industry, regulators and trade unions to spearhead that effort.
The group carried out an early review of the UK's drilling regulation and procedures; this gave rise to a high degree of confidence that practices drive the right health, safety and environmental behaviours. The review also identified some enhancements to the industry's preparedness to deal with a major well control incident, which were swiftly carried forward.
The UK regulatory regime is considered a gold standard in oil and gas provinces around the world and by the European Commission and one consequence of Macondo is that proposals have been brought forward for EU regulation offshore safety with the intent that all member states' offshore safety regimes are brought up to the standards in countries bordering the North Sea. However, Oil & Gas UK strongly believes that the blanket EU regulation proposed by the European Commission is not an effective or practical way to achieve the goal; indeed the impact of the proposed regulation would be quite the reverse. It will serve to confuse and complicate and in this way, not only increase the risk related to safety and the environment of UK operations, but also unnecessarily add significant cost to the Government and industry.
Throughout 2012, it will be crucial that we convey to the European Parliament and Council that new regulation in this area is fraught with difficulty. We feel confident in the support of the UK Government on this issue with the Secretary of State for Energy recently saying in the House of Commons: ''It is appropriate that if we are going to introduce minimum standards for offshore oil and gas, then that should be on the basis of a directive so that we can use our own legal means to put those objectives into force rather than a regulation, because the idea of a regulation which would apply directly in all of the member states seems to us to be inappropriate precisely because of the different circumstances that are inevitably involved.''
2012 will certainly be no less busy for Oil & Gas UK than 2011. Alongside the issues I have already touched on, we will work with members, particularly the contractor community, to increase the public's recognition of the scale. high technology and economic importance of this great industry of ours and to help them attract people with relevant skills to work in it. Oil & Gas UK looks forward to embracing all these challenges.
