New oil and gas leader warns $60 a barrel is here to stay

Deirdre Michie
Deirdre Michie

The new boss of the UK’s oil and gas body has issued a warning that the industry should prepare itself for $60 a barrel oil for the foreseeable future.

Deirdre Michie, chief executive of Oil and Gas UK, told North Sea leaders in Aberdeen yesterday that a fresh way forward within that context needed to be sought.

Her appeal comes just a day after global accountants PwC issued its own report calling on oil and gas firms to learn the lessons of Britain’s recent industrial past in order to combat the effects of oil prices which have fallen from about $115 a barrel to $63 since last June.

The crash has resulted in North Sea exploration reaching its lowest level in at least two decades amid thousands of job losses across the industry and thousands more expected.

Ms Michie said: “We have paid more to the Treasury than most other industrial sectors, we generate hundreds of thousands of skilled jobs, we have a vibrant supply chain, at home and abroad, and make a key contribution to the UK’s security of energy supply. It is an industry that has grown and evolved for 50 years.

“However, we now face real and present threats that are challenging our future. At $60 oil, 10% of our production is struggling to make money and there is a shortage of capital and a shortage of investors willing to place their money here.

“Therefore it is not unreasonable for the North Sea to set out its stall at being sustainable in a $60 world. As a target, it’s one that we as a trade association can champion, government can align with and the regulator can pursue as an enabler, for example, to focus on key infrastructure.”

She added that focusing on efficiencies would be a key factor for the industry’s future.

Ms Michie also believed it was vital for clients, employers, employees, unions, trade associations and governments to work together.

She said: “This is not a time for conflict or entrenched positions.

“We don’t need to wait for consensus, but we do need leadership in this industry to drive co-operation and an ‘early adopter’ culture from companies willing to rise to the challenge.”

The annual oil and gas industry conference also heard from First Minister Nicola Sturgeon, who called for no new tax rises for the sector.