Bloomberg News

U.K. Offshore Drilling Falls to Nine-Year Low, Deloitte Says

July 14, 2011

(Adds comment from Oil & Gas U.K. in fifth paragraph.)

July 14 (Bloomberg) -- Oil companies operating in the U.K. North Sea drilled 43 percent fewer wells in the first half, in part because of a tax increase, Deloitte Touche Tohmatsu said.

Operators drilled 20 exploration and appraisal wells in the period, down from 35 a year earlier, Deloitte said today in its North West Europe Review compiled by the consultant’s Petroleum Services Group. That’s the lowest rate since 2002.

“The reduction in activity is concerning,” Graham Sadler, a managing partner at Deloitte, said in an e-mailed statement, attributing the decline to a “lack of business confidence” and the U.K.’s “shifting fiscal regime.”

Chancellor of the Exchequer George Osborne raised taxes on oil-production profits to 62 percent from 50 percent in this year’s budget to pay for a lower duty on gasoline. BP Plc and BG Group Plc were among producers who said the increase would curb future investment in U.K. oil and gas fields.

The latest business survey “showed a 20 percent drop in confidence across the exploration, production and supply chain sectors,” Mike Tholen, economics and commercial director at Oil & Gas U.K., an industry lobby group, said today in an e-mailed statement. “It is imperative that the economics of less attractive projects are quickly aided by changes to the tax regime” and exploration is encouraged.

This month, the government increased tax allowances for some North Sea project investment, prompting Norwegian producer Statoil ASA to resume work on the Mariner field development.

“The negative trend is not reflected everywhere in the continental shelf, with Norway recording a 10 percent increase on their second-quarter average for the last decade,” Deloitte said. “The Netherlands also reported consistent drilling levels for the year to date compared to 2010.”

--Editors: Alex Devine, Amanda Jordan

To contact the reporter on this story: Eduard Gismatullin in London at

To contact the editor responsible for this story: Will Kennedy at

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