The head of Britain’s new oil regulator, Andy Samuel, told oil industry executives he would not hold back using new powers to fine companies or even revoke their licenses if he thinks they are too slow in squeezing more oil out of North Sea fields.
Samuel, chief executive of the Oil and Gas Authority (OGA) which officially became a government company earlier this month, is tasked with setting the right regulatory framework to encourage oil and gas companies to extract as much of the 20 billion barrels of oil equivalent still estimated to be trapped beneath the UK North Sea.
High costs, ageing infrastructure and the two-year long slump in oil prices have meant fewer new fields than ever are being found offshore Britain as companies prefer other prospective areas like Brazil to spend money on exploration.
Despite this, Samuel says Britain’s North Sea has more to give, with unit costs in the area now expected to fall to an average of 13 pounds a barrel this year, down from 18 pounds in 2014.
In this environment, North Sea oil operators need to do their part to tap the remaining resources.
“We’re quite clear that where the pace is just too slow, we’ve tried facilitation and it’s just not working, then we will not hold back from using the new powers,” Samuel told Reuters in an interview on the sidelines of an industry conference in Aberdeen.
Since Oct. 3, the OGA has legal powers to impose fines on operators of up to 1 million pounds ($1.2 million) and to withdraw their operating licenses if they are deemed to not comply with regulations aimed at maximizing the output of oil and gas.
Samuel said the body had already written to operators involved in four separate cases, urging them to improve performance, without revealing further details.
Lower costs, a cut to taxes made last year and relatively high drilling success rates mean the body is expecting a slight pick-up uptick in exploration work in the coming three years, after drilling offshore Britain dropped to the lowest in 45 years this year.
Source: Reuters (Reporting by Karolin Schaps; Editing by Greg Mahlich)