LONDON |
(Reuters) - Oil and gas production, one of the main pillars for growth in Britain's 1.5 trillion pound economy, could increase this year after the worst annual decline in output since the 1960s, Energy Minister Charles Hendry told Reuters in an interview on Monday.
UK oil output fell 17 percent last year to an average 1.04 million barrels per day (bpd), below a record of 2.9 bpd in 1999, while gas production plummeted 21 percent to 45.2 billion cubic metres (bcm), less than half of its peak reached in 2000.
When asked whether production would continue to decline this year, Hendry said: "I wouldn't expect that at all. My expectation is that we will now see things beginning to move back up again."
"It may be plateauing but I would certainly expect us to see, from the discussions I have with the industry, some pretty positive feelings about the way in which the industry can move forward," he said. "I don't believe that the decline last year was a trend."
The dramatic fall in oil and gas production shaved at least half a percentage point off UK economic growth in 2011, a major difference for an economy that is stagnating as businesses struggle with the gravest economic crisis since the Great Depression.
The Bank of England last month slashed its outlook for economic growth to zero for 2012, posing a difficult electoral problem for Prime Minister David Cameron's government, which had been betting on growth well before a 2015 national vote.
"The new licensing round, which was launched three months ago, has had more bids in it than any previous licensing round since the 1960s, so there is a huge interest in taking this forward," said Hendry, a Conservative MP.
Britain's North Sea oil and gas, long a driver of British prosperity and boon for now dire public finances, has been in decline for over a decade, but Hendry said the scope and speed of the decline depended on finds west of the Shetland Islands - a group of islands off the northern coast of Scotland.
"It depends on the extent of the discoveries west of Shetland primarily - that is where the hope and the scope is for major new finds," Hendry said in an interview in his office in London's Westminster.
"We think there is another 20 billion barrels equivalent that we can still get out from the North Sea. West of Shetland is an important part of that process. Business as usual would be less than half of that."
Britain is seeking hundreds of billions of dollars of investment into its electricity and gas sectors, also attracting the attention of Chinese investors, who could bid to build two new nuclear power stations in Britain.
"The Chinese have got significant expertise in building nuclear plants and they've been building them on time and on budget," Hendry said.
China Guangdong Nuclear Power Corporation Holding (CGNPC) and State Nuclear Power Technology Corporation (SNPTC) have both expressed an interested in snapping up the Horizon nuclear project, which was put up for sale by its German owners E.ON and RWE in March.
Critics have voiced concerns about Chinese companies owning important British infrastructure assets, but Hendry said the government would not allow unreliable investors into the sector.
"We will have to be satisfied that anybody coming here can satisfy us on security, on safety, on efficiency grounds," he said.
SHALE GAS
The government is also in the process of determining whether to allow the continuation of shale gas fracking work, which unleashed a number of earthquakes near Blackpool last year.
The shale gas boom has caused significant turmoil in the U.S. gas market, where prices have tumbled and production companies are gearing up to export excess resources on liquefied natural gas vessels.
"We can't ignore what's happened in the States when the States has a gas price which is a quarter of ours. This is now a massive economic driver for the United States," Hendry said.
He added that a decision on whether to give the green light to fracking was not imminent and that his department was considering expert evidence collected over the past months.
"We should be looking at where those resources could be harnessed safely and in an environmentally acceptable way," he said.
"We will apply exactly the same stringent regulations to fracking and to onshore gas development we apply to offshore. We will not cut corners."
While Britain's domestic production levels are shrinking, the country is increasingly dependent on imports, through pipelines and via LNG ships.
Hendry said the UK was trying to secure long-term supply contracts rather than relying on spot prices.
"We have developed this concept of energy diplomacy, the major contracts should be supported actively by government," he said, adding that the government was keen to support more contracts than those recently signed with Qatar and Norway.
As the United States is considering to dust off plans for an emergency oil stocks release, Britain said it stands ready to ask the International Energy Agency to take action to deal with high oil prices.
Hendry said he was constantly speaking to his oil consumer nation peers but that talks were confidential.
"We talk the whole time about a whole range of issues. The nature of these events (emergency oil stocks release) is better to be in a coordinated way," he said.
(Editing by Leslie Gevirtz)
No comments:
Post a Comment