PRODUCTION of gas and oil from the massive Culzean field in the North Sea was given the green light yesterday by the UK Oil and Gas Authority.
Originally discovered in 2008, Culzean is the largest new North Sea oil and gas field to enter the development stage for a decade.
Owners Maersk Oil say Culzean is the largest gas field sanctioned for exploitation since East Brae in 1990, and is expected to produce enough gas to meet five per cent of the UK’s needs when it reaches peak production.
Maersk estimate that Culzean holds reserves equivalent to more than a quarter of a billion barrels of oil. The company said the development will create more than 400 direct jobs and is expected to support an estimated 6,000 jobs in the UK.
During his visit to Scotland yesterday, Chancellor of the Exchequer George Osborne heard Maersk Oil say that its plans to develop the field were boosted by tax changes that he announced recently.
The Chancellor said: “It is clear signal that the North Sea is open for business.
“Already the UK’s oil and gas industry supports hundreds of thousands of jobs across the country and this £3 billion investment comes on the back of massive Government support for the sector. Despite challenging times, this Government has backed the oil and gas industry at every turn, introducing a vital package of support to help it to protect and create jobs.”
However, Scotland’s energy minister Fergus Ewing called on the Westminster Government to do more for the industry.
He said: “Development of the Culzean field brings welcome investment, jobs and supply-chain opportunities and, as the largest new field in a decade, it also demonstrates that there remain considerable opportunities to extend production for decades to come. However, in order to ensure that we maximise the recovery of the remaining North Sea resources, it is vital that the Chancellor urgently consults on measures which support exploration – a commitment that the UK Government made in December 2014 but have yet to deliver any follow-up action.
“The benefits from exploration not only boost future production, but will also be felt across the supply-chain and the wider economy but last year North Sea exploration reached its lowest level in at least two decades, with only 14 explorations wells drilled, compared to 44 in 2008.
“It is critical that reforms to the regulatory and fiscal regimes applying in the North Sea are expedited and prioritised with a view to ensuring the economic viability of investment like this if we are realise the opportunities for development of the vast remaining resources in the North Sea.
“As Sir Ian Wood warned just last week the Treasury must open talks about the tax regime and the Chancellor must use his visit to the North-east to listen to the industry.
“We are extremely concerned that, as reported this weekend, there are a large number of fields which may be forced to stop production prematurely, when there is a great deal of oil and or gas to be extracted.
“Since the both the UK and Scotland have objectives to maximise recovery, the premature cessation of production could be one of the most costly policy failures in the UK Government’s history due to the potential loss of future tax revenue.
“We are supporting jobs in the North Sea through actions such as setting up the Energy Jobs Taskforce in January, which is co-ordinating action between government, the wider public sector industry and industry bodies.
“Working in partnership with industry is far more effective than operating in isolation, and will ensure that we avoid situations like the Chancellor’s sudden tax hike in 2011, which damaged the view of the UK fiscal regime in boardrooms around the world.”
Culzean’s arrival is further proof that exploration and development is far from dead on the UK Continental Shelf, as shown by the 41 new drilling licences awarded recently on top of the 134 confirmed in late 2014, making this one of the largest rounds in the years since the first licensing round took place in 1964.
Gas from Culzean is expected to start flowing in 2019 and continue for at least 13 years with peak production of 60,000-90,000 barrels per day.
Chief executive of Maersk Oil Jakob Thomasen said: “Culzean is an important development for the UK and also for Maersk Oil and our co-venturers.
“We are pleased the field will support UK economic growth as well as extend understanding of HPHT development.
“Culzean is the latest in a series of large investments by Maersk Oil in the North Sea where we are active in Denmark, Norway and the UK, reflecting our commitment to the future of the North Sea region.”
Andy Samuel, chief executive of the Oil and Gas Authority, said: “Maersk Oil and partners’ £3bn investment to develop the Culzean discovery is excellent news for the UK during a period when the decline in global oil prices has created difficult operating conditions for this critical sector of our economy.”
Deirdre Michie, chief executive of industry body Oil and Gas UK, said: “Oil and Gas UK welcomes the development approval of the largest new field discovered in the UK North Sea in more than a decade.
“This investment by Maersk Oil and its co-venturers is very encouraging at this challenging time for the industry and reinforces the fact that the UK Continental Shelf continues to have much to offer.”
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