All at sea over tax changes

Offshore

The offshore industry’s main concern is the outcome of the Government’s review of the North Sea tax regime.

The oil companies and contractors tried hard last year to persuade the Government not to make changes which, they argue, will jeopardise investment in Britain’s oil and gas sector. It would destroy a potentially enormous export industry in technology and services, they say.

The consultation process continues, but ‘I don’t think we will know in any concrete terms until the Budget,’ says Syd Fudge, chairman of the Offshore Contractors’ Association.

There have been hints that even a marginal increase in tax could threaten future developments.

The development of 150 million 300 million barrels of oil from the southern end of the giant Clair field off the west coast of Scotland could be such a casualty. The partners BP, Chevron, Amerada Hess, Conoco, Elf and Enterprise are assessing the results of a well test for a plan for board sanction in 1998. While Clair is estimated to have 5 billion barrels in place, geological difficulties make it a marginal prospect. It would be a serious blow if it fell by the wayside.

It is one of the few prospects on the west of Scotland in water shallow enough to use conventional production platforms. These offer far more work in engineering/construction tonnage than floating systems.

Another factor that could inhibit North Sea developments is a shortage of key engineering skills, notably process engineers. Pierre Jungels, chief executive of Enterprise Oil, warned in November that lack of the right people was already having an impact.

‘We do have a shortage of key engineering skills,’ agrees Fudge. He says the answer is to lure engineers away from other industrial sectors. Various initiatives are under way, such as the programme launched by Aberdeen University to retrain process engineers for offshore work.

The continuing spending shift in the North Sea from developments to operations may lead to more long-term maintenance and support contracts, with enhanced responsibility for contractors this year.

Andrew Cavenagh