As hydrocarbon reserves become harder to recover, technological expertise will keep oil supplies flowing, solving the challenges facing the global industry.
New technology is fundamental in supporting efficient production, and staying ahead in the R&D game is not only the responsibility of the industry – reforms are needed on a fiscal as well as a national level. With the collapse of bank profits and slow post-recession recovery, the oil and gas sector now is the biggest contributor of corporate tax to the UK Treasury.
Research shows that UK production still can meet much of the domestic energy requirement. More hydrocarbons can be extracted; however, this depends on the right tax incentives for oil and gas operators – not subsidies, buttax breaks.
The rules regarding R&D expenditure need to be re-examined to boost project activity on the UK Continental Shelf (UKCS). Currently, if an operator contracts research from a university, the company can obtain tax credit. However, if the R&D work is carried out by a contractor, the contractor receives the tax credit.
A more fair system would award the tax credit to the party that actually pays for the R&D program.
Consideration also should be given to increasing the levels of tax incentives for both R&D and technology demonstration. Much can be learned from Norway’s successes in this area, particularly with regard to making field trials more tax-efficient.
Today much activity is geared toward small fields. But recent news of big finds is a reminder that although the Central North Sea is mature, it is very much alive and healthy.
In the past, it has been estimated that 5.6 Bboe reserves could be made economic over a five-year period in the UKCS through the deployment of new technologies. It is widely recognized that new technology has been responsible for reducing the risks involved in exploration and slashing drilling times by half. These advantages alone arecritical factors in encouraging companies to adopt technology as the way forward.
ITF fosters the need for collaboration between operating companies, large service companies, small and medium-sized enterprises, universities, and academia to distribute the risks and benefits of technology innovation.
In the UK, there are many organizations working to their own agendas. A national coordinated approach like Norway’s that annually identifies and addresses one set of industry challenges would be a better way forward for the UK. A country-wide strategy for new technology is required to get the remaining reserves out of the ground.
All parties should agree to a set of goals so a united, strategic approach to achieving these objectives becomes a reality. Although a lot of work is being done in the UK, it is carried out in a very fragmented manner. The country needs to focus on identifying and understanding the industry’stechnology needs as well as promoting the role of an intermediary, such as ITF, among the organizations involved.
This type of umbrella model exists in Norway – OG-21 – where partnering among government, oil companies, the supply industry, research institutions, and academia acts as a catalyst, ensuring new technology is developed and tested and that solutions are implemented.
Increased investment in technology is needed by all UK stakeholders to producea realistic impact in terms of enhanced investment and recovery in the UKCS.
Because full-scale testing must be completed before a technology can be accepted into the market, commercializing technology to the oil and gas market is costly and time-intensive, requiring nearly twice as long as in other sectors. This is why UK end-users must demonstrate commitment to field trials, pilot new technologies, and overcome the risk-averse mood, which can be very inhibiting.
Now is the time when all those involved in UKCS operations, including the Department of Energy and Climate Change and HSE, need to collaborate to develop the technologies needed for the North Sea Basin. Without this unified approach, it will be very difficult for the country to develop much of the remaining 5.6 Bboe.
Recommended Reading
Exclusive: ‘Reality Has Hit,’ NatGas Not Just a Bridge Fuel, Landrieu Says
2024-04-11 - The Biden administration's LNG pause is "disappointing" and natural gas is a "solution to energy woes," co-chairs for Natural Allies for a Clean Energy Future Senator Mary Landrieu and Congressman Kendrick Meek told Hart Energy's Jordan Blum at CERAWeek by S&P Global.
CERAWeek: Energy Secretary Defends LNG Pause Amid Industry Outcry
2024-03-18 - U.S. Energy Secretary Jennifer Granholm said she expects the review of LNG exports to be in the “rearview mirror” by next year.
Energy Transition in Motion (Week of March 22, 2024)
2024-03-22 - Here is a look at some of this week’s renewable energy news, including a new modeling tool for superhot rock.
US Interior Department Releases Offshore Wind Lease Schedule
2024-04-24 - The U.S. Interior Department’s schedule includes up to a dozen lease sales through 2028 for offshore wind, compared to three for oil and gas lease sales through 2029.
National Petroleum Council: A Realistic Path to Scaling US Hydrogen
2024-05-15 - A report by the National Petroleum Council, the culmination of about 18 months of work, offered 23 recommendations to help the hydrogen industry grow through 2050.