UK Govt, Oil Industry Attempt to Resolve North Sea Tax Issue

- UK Govt, Oil Industry Attempt to Resolve North Sea Tax Issue

Thursday, September 08, 2011
Dow Jones Newswires
ABERDEEN
by Alexis Flynn & Sarah Kent

The U.K. government and the North Sea oil and gas industry have set up a joint forum to discuss issues around the fiscal regime, although resolution on possible tax relief for the decommissioning of old fields and installations will likely take some time, Treasury Minister Justine Greening said Thursday.

North Sea oil and gas companies have been vocal in their criticism of Chancellor of the Exchequer George Osborne's decision to raise the top rate of tax on profits from offshore production in the last budget. They have argued that investment in what is a mature and declining basin risks being stymied by an unpredictable and onerous tax regime.

Greening, who was speaking at an industry conference here, said the new forum would include representatives from the Treasury, lobby group Oil and Gas UK and senior officials from the Department of Energy and Climate Change. By meeting on a regular basis, the forum would help the industry get more clarity on potential changes to the tax regime, and discuss possible future tax relief, such as decommissioning.

"What we will try to do is put some certainty in that. Now, obviously we can't always tie the hands of governments going forward, [but] I think what we can do is look to see to what extent we can find a way through this," said Greening.

Head of Oil and Gas UK Malcolm Webb said he was encouraged by the discussions.

"It was a very constructive meeting," said Webb.

However, Greening said it was impossible to say whether the issue around decommissioning would be resolved in time for the next budget

"I'm not going to put a timeline on it. What I can say is we've got a couple of working groups set up, one of them around decommissioning and we would like to very constructively work with the industry on that and we've been encouraged by the progress made. But let's be clear. If sorting out a long-term solution to decommissioning was easy it would have been sorted out a long time ago. We absolutely want to work on this as fast as we can. But what I think matters is getting the right long-term solution, one that stands on its own two feet," she said.

Webb said that although there was still lingering frustration over the unanticipated nature of the earlier tax increase, it was time for both industry and government to look to the future.

"There's some regret, but what the industry is determined to do is to turn the page to overcome the problems that the government has presented us with, and we really were encouraged [by the meeting] today."

Copyright (c) 2011 Dow Jones & Company, Inc.

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UK Govt Reveals Device to Cap Underwater Oil Blowout

- UK Govt Reveals Device to Cap Underwater Oil Blowout

Tuesday, September 06, 2011
Dow Jones Newswires
LONDON

The U.K. government will later Tuesday reveal a device designed to cap an underwater oil well in the event of a major incident so as to minimize environmental damage, the Oil Spill Prevention and Response Advisory Group said.

The device was designed in response to BP PLC's (BP) oil spill in the Gulf of Mexico in April 2010. The cap works by shutting in and holding pressure on an uncontrolled well and uses a choke and a series of valves to stop the flow of oil into the water.

The device can be deployed in water as deep as 10,000 feet and was designed specifically for use in wells in the U.K. continental shelf.

"The successful completion and availability of this cap marks a significant step forward in industry preparedness and significantly bolsters our capability to deal with a major loss of well control," said James House, chair of the Oil Spill Prevention and Response Advisory Group.

The device allows a quick response and is essential for minimizing potential pollution in the water, even though the U.K hasn't had a major loss of well control in 20 years of offshore operations, House said.

Copyright (c) 2011 Dow Jones & Company, Inc.

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RWE Dea's UK Fields Breagh and Clipper South on Track

- RWE Dea's UK Fields Breagh and Clipper South on Track

Wednesday, August 31, 2011
RWE Dea AG

RWE Dea UK's field developments Breagh and Clipper South are both progressing on schedule. On a visit to Heerema's fabrication yard in Zwijndrecht (Netherlands) Wednesday, RWE Dea CEO Thomas Rappuhn emphasized the high significance of both projects: "The proven reserves play an important role to significantly increase RWE Dea's gas production in the North Sea."

"Breagh for example is one of the largest natural gas discoveries in the Southern North Sea and our target is to bring field developments on stream quickly," added RWE Dea UK Managing Director René Pawel.

Gross investments are GBP 430 million (Breagh, Phase 1) and GBP 240 million (Clipper South). RWE Dea holds 70% interest in the Breagh gas field as operator (Sterling Resources UK 30%). With a stake of 50% in Clipper South, RWE Dea is operator with Fairfield Energy and Bayerngas each holding a 25% stake.

Pawel said, "We remain on course to achieve production from the Breagh field less than three years after we acquired operatorship of the Breagh license and expect first gas in the second half of 2012 and from Clipper South in the first half of 2012."

Both platforms are being constructed by the Heerema Fabrication Group. The Breagh platform consists of a jacket approximately 85 meters tall with a total weight of some 4,000 tonnes and topside of approximately 1,400 tonnes. The topsides have been moved out of the shed and are ready for sail-away from Heerema's fabrication yard mid September. The jacket is on schedule for load out early September. The Clipper South platform with topsides weighing 1,900 tonnes has accommodation for 40 persons and sailed away for offshore on Thursday 25th and was successfully installed on Saturday, August 27 with standalone overnight manning on the day of installation – testimony to the very high level of completion on departure from the yard. The Clipper South platform is in a water depth of approximately 23 meters, and a 12" pipeline will connect to the ConocoPhilips operated LOGGS complex for onwards transportation of gas to the Theddlethorpe terminal in the UK.

The Breagh field is located in UKCS blocks 42/12a and 42/13a of the southern North Sea in 62 meters water depth, approximately 100 kilometers east of Teesside. Around 100 kilometers of 20" pipeline have been successfully installed offshore. The platform will be installed by Heerema Marine Contractors.

The field is being developed in two phases. Phase 1 entails gas to be exported via the 20" pipeline from the Breagh Alpha platform to Coatham Sands, Redcar on the UK mainland, and a 10 kilometers onshore pipeline for processing at the Teesside Gas Processing Plant (TGPP) at Seal Sands. The TGPP site is owned by Teesside Gas & Liquids Processing, and after processing at the TGPP, the gas will enter the UK National Transmission System. Phase 2, planned to receive project sanction in late 2011, is expected to include additional wells in the east of the field likely to be drilled from a further Breagh platform tied back to Alpha.

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Bridge Inks Farm-In Deal with TAQA Offshore UK

- Bridge Inks Farm-In Deal with TAQA Offshore UK

Thursday, August 25, 2011
Bridge Energy ASA

Bridge announced that, along with its current license partners, it has signed a farm-in agreement with TAQA Bratani Limited ("TAQA") relating to UKCS License P201 Block 211/22a North West Area (Bridge 10%) whereby TAQA has agreed to carry the cost of an exploration well to earn an interest in the license.

Under the terms of the agreement and subject to the approval of the UK Department of Energy and Climate Change ("DECC"), TAQA will assume operatorship and drill an exploration well on a prospect known as Contender in the southern area of the block from the TAQA-operated Cormorant North Platform. The well will target the Jurassic Brent sequence of sandstones at a projected drilling depth of 16,900 feet, less than two kilometers east of the Cormorant North Field. The well is expected to spud during the first half of 2012 and will be completely funded by TAQA.

If successful, TAQA will earn 60% interest in the southern area of the block (the "Contender sub-area") and 35% interest in the northern part (the "Kerloch sub-area"). Bridge's remaining interests will be 4% in the Contender sub-area and 6.5% in the Kerloch sub-area.

Tom Reynolds, Bridge's Deputy Chief Executive, said, "We are delighted to have TAQA as a partner in the Kerloch and Contender license area and encouraged that a further exploration well will be drilled within the Bridge portfolio in 1H 2012; in addition to the existing four wells on our 2012 drilling program. TAQA has been successful in the area with the Cormorant North Field and is well placed to further explore the Contender prospect.

"Subject to exploration success; the testing of the well and delivery of production could be conducted at minimal cost and within a short time-frame."

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UK Oil Industry Confidence Increases on Quarter

- UK Oil Industry Confidence Increases on Quarter

Wednesday, August 17, 2011
Dow Jones Newswires
LONDON
by Alexis Flynn

The outlook of firms producing oil and gas in Britain improved in the second quarter from the previous three months, data from Oil & Gas U.K. showed Wednesday, although the industry body said business confidence remains "fragile" in the wake of a tax increase announced in March.

Oil & Gas U.K. said overall industry confidence increased modestly from 51 to 54 points. The index measures a number of economic indicators and gauges overall industry confidence on a 100-point scale, with a rating above 50 indicating a more positive outlook and a rating below 50 representing a more negative viewpoint.

Industry confidence fell 12 points on a quarterly basis in May after Chancellor of the Exchequer George Osborne in March imposed a large and unexpected tax rise on the sector, increasing the state's take on oil and gas profits to 32% from 20% overnight.

The government has since announced a concession to North Sea producers by offering some relief for investments in marginal fields.

Ken Cruickshank, Oil & Gas U.K.'s supply chain manager, said that while confidence had improved among the majors, the outlook among independent operators had soured further.

"While it appears that some companies may feel reassured by the Treasury's willingness to engage on ways to mitigate the negative impact of the tax increase on investment, the confidence of many independent operators in particular continued to decline in the second quarter," Cruickshank said.

Copyright (c) 2011 Dow Jones & Company, Inc.

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Flexlife Opens New Base in UK

- Flexlife Opens New Base in UK

Tuesday, July 19, 2011
Flexlife

Flexlife has opened a new base in Newcastle and plans to recruit 25 staff by the end of this year, rising to 50 within 18 months.

The award-winning company has appointed Andrew Lake as Director of Operations in Newcastle. He is a Chartered Engineer with more than 30 years experience, including senior roles at Soil Machine Dynamics, BPP Technical Services and Wellstream International. He holds a 1st class Mechanical Engineering degree and is a Member of both the Institute of Mechanical Engineers and the Association for Project Management.

As well as attracting new recruits into the industry, Flexlife believes the location will be a draw to many workers who commute weekly to Aberdeen and other energy hubs at present. The office is at the newly developed Baltic Place on the quayside near to the Millenium Bridge.

Chief Operating Officer John Marsden said, "We know from our experience that there is a talented pool of highly-skilled staff in the Newcastle area and we are hoping to tap into that. We have the best team in the industry and are confident we will quickly attract the same caliber of staff for our Newcastle office. We are already off to a great start with Andy taking charge of our operations in Newcastle."

Mr. Lake said, "Flexlife is experiencing a period of significant growth and the new office will expand our capability to offer specialized support to our clients. The choice of Newcastle for this latest expansion recognizes the skills in the region and will be a new addition to the growing subsea sector in the North East of England."

Mr. Marsden added, "Flexlife has continued to build on its reputation for offering a full subsea integrity and project management package, assisting clients to cost-effectively manage all of their subsea assets and infrastructure. Looking ahead, the Newcastle office will provide us with the capability to expand our range of services to include front end engineering design to support the ongoing work for our clients."

Flexlife reported an increase in turnover of more than 50% for year ending 2010/11, with a rise from £4.8million to £7.5million. A further rise to £17.8million is predicted for 2011/12.

As well as the new office in Newcastle, Flexlife has moved into premises in Brazil and taken on a new global HQ in Aberdeen. The company also operates in Africa, the Far East and Mediterranean and staff numbers globally are expected to reach 120 by the end of this year.

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Injuries, Spills in UK Offshore Oil Fall - HSE

- Injuries, Spills in UK Offshore Oil Fall - HSE

Tuesday, July 19, 2011
Dow Jones Newswires
LONDON
by James Herron & Alexis Flynn

There were less potentially hazardous oil and gas leaks from offshore installations operating in the U.K. North Sea than in the corresponding period a year earlier, although the industry has yet to improve on the record low number of incidents recorded two years ago, data from the Health and Safety Executive showed Tuesday.

There were 73 major or significant hydrocarbon releases offshore in 2010-2011, down from 85 the previous year, the HSE said in its annual statistical report. Few of these releases could be considered as oil spills, it said. However, this was still significantly more than the record low of 61 incidents in 2008-2009. There were only seven incidents where a quantity of hydrocarbon liquid was released to the sea, with the amounts ranging from minimal to 500 kilograms, it said.

No workers were killed and there were 42 major injuries reported in the period, down 16% from 50 reports the prior year, the HSE said. The combined fatal and major injury rate fell to 151.84 per 100,000 workers in 2010-2011 compared with 187.9 in 2009-2010, the third lowest rate over the last 10 years, it said.

There were 432 dangerous occurrences reported in 2010-2011, down 2.5% from 443 in the preceding year, the HSE said.

The backlog of maintenance work on safety critical systems continue to decline, according to data gathered by the industry, the HSE said.

"This year's statistics are a step in the right direction," said Steve Walker, HSE's head of offshore safety. "But there is still much work to be done. Hydrocarbon releases are a key indicator of how well the offshore industry is managing its major accident risks, and the industry still hasn't matched or exceeded the record lows of two years ago," he added.

Walker said companies need to pick up the pace of improvement and that he expects all operators to be drawing up and implementing plans to meet that end.

Robert Paterson, industry body Oil & Gas U.K.'s health and safety director, said the statistics reflect the "significant effort made in the last 12 months to get back on track after last year's disappointing performance."

Paterson said the maintenance of safety critical systems remains of paramount importance for all members of Oil & Gas U.K. but acknowledged "there were still areas for us to improve upon."

Copyright (c) 2011 Dow Jones & Company, Inc.

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Egdon Equalizes Interest, Completes Seismic Survey in UK

- Egdon Equalizes Interest, Completes Seismic Survey in UK

Tuesday, June 14, 2011
Egdon Resources plc

Egdon updated on changes to certain of its UK license interests as well as details of a recent seismic survey.

Egdon have reached agreement with Europa O&G and Celtique to equalize working interests across contiguous Petroleum Exploration and Production Licenses ("PEDL") 180 and 182 in the East Midlands. Egdon is the current operator of PEDL182 and will assume operatorship of PEDL180. On conclusion of the transaction, which is subject to approval from the Department of Energy and Climate Change ("DECC"), Egdon will hold a 33.33% interest in both licenses reducing from its current 50%. The transaction provides alignment for the planned exploration program for this area, which contains a trend of oil prone structures including the Broughton oil discovery and Wressle Prospect, which spans the two licenses. A joint 3D seismic survey is planned for later in 2011 to firm up drilling locations for the licenses. It is hoped to drill during 2012 as part of a planned multi-well drilling program in the East Midlands.

Egdon have also reached agreement with Celtique whereby Celtique will acquire a 25% interest in PEDL181 from Egdon, again subject to approval by DECC. Following completion, Egdon will hold a 25% interest. Europa is the operator of PEDL181 with a 50% interest.

Egdon's interests in PEDL180 and 181 were acquired from Valhalla Oil and Gas Limited ("Valhalla") earlier in 2011. The licenses are covered by an Area of Mutual Interest agreement between Egdon and Celtique. Celtique will assume 50% of the consideration to Valhalla. This will comprise the payment of a 10% Net Profit Interest ("NPI") on each 25% interest in PEDL180 and PEDL181 assigned to it by Egdon (2.5% net). The NPI is payable from revenues after recovery of pro-rata exploration, development and production costs.

Elsewhere in the East Midlands, Egdon reported the successful completion of a 13 kilometer 2D seismic program over the Burton on the Wolds Prospect in PEDL201 where Egdon holds a 50% operated interest. The Burton on the Wolds prospect is located on the southern margin of the Widmerpool Basin to the South-East of the Rempstone Oil Field and is a four-way dip-closed prospect associated with an underlying seismic anomaly. Indicative prospective resources are estimated by Egdon at around 1.5 million barrels.

Commenting on the recent developments, Egdon's Managing Director Mark Abbott said, "We are pleased to have reached agreement with Europa and Celtique in relation to PEDLs 180, 181 and 182 and to have assumed operatorship of PEDL180. We are now in a position to operate the forthcoming 3D seismic program and develop plans for drilling on this highly prospective trend with a uniform Joint Venture partnership. The early results of the seismic program over the Burton on the Wolds Prospect look encouraging and we hope will lead to a firm drilling location."

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UK Tax Increase Hurts South Morecambe Profitability

- UK Tax Increase Hurts South Morecambe Profitability

Thursday, June 02, 2011
Rigzone Staff
by Karen Boman

Centrica will operate its South Morecambe gas field intermittently in the future as the increase in UK Supplementary Corporation Tax means the field's profitability may be marginal.

The tax increase means the South Morecambe field will be taxed at 81 percent. Decisions on when to run the field are made on a commercial basis, taking into account market factors, operating costs and earnings, a company spokesperson said.

"We will continue to monitor the market closely to make production decisions and if it makes more economic sense to buy gas for our customers in the wholesale market we would limit South field production."

Planned maintenance at the field has been completed and the field has been operationally available since May 28, a company spokesperson said.

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O&G UK Disappointed after UK Tax Talks

O&G UK Disappointed after UK Tax Talks

Tuesday, April 19, 2011
Dow Jones Newswires
by Alexis Flynn

The group representing major U.K. oil and gas producers said Thursday it was disappointed following talks with Chancellor of the Exchequer George Osborne on the impact a large tax increase on North Sea production would have on the industry.

Oil & Gas UK Chief Executive Malcolm Webb said, "Notwithstanding the Chancellor's requirement to raise money, [we] explained why both the unexpected nature and the scale of the increase to between 62% and 81% tax has damaged investor confidence and will hamper investment, maximum recovery of the U.K.'s oil and gas and job creation. Disappointingly, the Chancellor has a different view."

However, Webb said the Treasury requested further talks on how a mooted price floor mechanism, which would see the tax lowered in the event that prices dropped substantially, would work in practice. He said that it also wanted to discuss new and further field allowances, as well as continued dialogue on issues around decommissioning, to be concluded by Budget 2012.

A Treasury spokesperson told Dow Jones Newswires, "Today's meeting was constructive and while the Chancellor was clear that there would be no change in policy, he agreed to work closely with industry on the three areas for discussion set out in the Budget; setting the trigger price, stability in decommissioning and field allowances to support further investment."

Toyota to cut back production in the U.K.

Toyota to cut back production in the U.K.



Apr 13, 2011

Toyota (TM) is cutting production in the U.K. as a result of the March 11 earthquake and tsunami in Japan. The automaker will suspend production at its vehicle factory in Burnaston, Derbyshire and at its engine plant in north Wales over the Easter holiday period in an effort to conserve parts. Additionally, the automaker is planning reduced production volumes in May.

UK Oil Producers to Lobby Osborne Over North Sea Tax Hike

UK Oil Producers to Lobby Osborne Over North Sea Tax Hike

Thursday, March 31, 2011
Dow Jones Newswires

by  James Herron & Alexis Flynn 

Major U.K. oil and gas producers said Thursday they will directly lobby Chancellor of the Exchequer George Osborne to mitigate the effects of a large tax increase on the industry, after a meeting with the energy minister and other senior government officials failed to allay their concerns.

The move comes as several large companies said they were reconsidering billions of pounds of investments in oil and gas production after last week's shock tax increase, and as the government published figures showing that U.K. oil and gas import dependence grew significantly last year.

Earlier Thursday, industry group Oil & Gas U.K. met Energy Secretary Chris Huhne to raise its concerns about the country's new tax regime, which it argues will hinder investment and result in job losses. Chancellor of The Exchequer George Osborne last week announced a GBP2 billion tax increase on oil production in the government's latest annual budget.

Several producers have already voiced their concerns at the decision, with Norway's Statoil and France's Total both saying they would re-appraise their investment plans in light of the news.

Of particular concern to companies affected by the tax rise is whether the government will stand by its stated commitment to lower the tax on producers if the price of oil made a "sustained" drop to around $75 a barrel, said one person at a U.K. oil producer.

U.K. North Sea explorers and producers are "seeking a lot of clarity on this floor price of $75 and want assurances that this genuinely will be implemented," the person told Dow Jones Newswires Thursday.

"I don't think there's a great deal of confidence at the moment that that is written in stone," said the person, who asked not to be identified.

Oil and Gas UK said Wednesday the "sudden and destabilizing" nature of the tax increase meant it was likely more companies would follow Statoil's lead.

The strong industry reaction was partly due to the surprise nature of the announcement, the person said.

The oil and gas industry is a "long-term business that prides itself on risk management, on planning. It's not very good at dealing with surprises," he said. "At some point things will settle down, but it isn't going to happen soon."

Scottish lawmakers lambasted the government's failure to consult on the issue.
First Minister Alex Salmond, whose Gordon constituency includes Aberdeen, the capital of the U.K. oil and gas industry, said the government should have met with firms before the announcement.

"Furthermore, the tax changes announced by the chancellor are totally ill-thought through and run the risk of diverting investment away from the North Sea," Salmond said. "There is nothing wrong with making taxation responsive to profitability and high oil prices, however it has to be done in a planned fashion with appropriate incentives for marginal fields and infrastructure development in order to avoid the impact on Scottish jobs which the chancellor's spatchcock and desperate moves now put at risk."