Tax breaks help UK lead way in European oil exploration efforts

Marion Dakers
THE UK is leading a minor resurgence in European oil and gas exploration, according to figures out yesterday.

A stable oil price and new tax breaks to offset exploration charges imposed in 2010 have encouraged explorers in British waters to drill more in the third quarter of the year, Deloitte said in its survey of the industry.

More than half of the wells spudded in north west Europe were drilled on the UK Continental Shelf, helping to take the total to 33.

While this is down on a year ago, when 38 wells were spudded, the quarter showed signs of recovery after a slow start to 2012.

Dealmaking is also up across the region, Deloitte said. More than 100 deals have been reported so far this year in north west Europe, a rise of 15 per cent on 2011. Sixty-four of those deals occurred on British sites, made up mostly of farm-ins.

Five of the seven UK sites to come onstream this year qualified for one of the new field allowances introduced by the coalition in 2012.

“The government’s efforts to stimulate activity through a series of tax relief schemes are starting to filter through and, along with a sustained high oil price, smaller and technically challenging fields continue to be a much more attractive investment proposition than might have otherwise been the case,” said Deloitte energy partner Graham Hollis.

Activity in the North Sea remains below pre-crisis highs, when the price of oil surged close to $140 a barrel. The price of Brent crude this year has slipped slightly to $109.63, after two years of steep gains in the wake of the 2008 financial crisis when oil nudged $140 a barrel.