Britain Develop Deep Water for More Oil, Gas

Source: Reuters 10/27/2010, Location: Europe

Britain has granted licenses to probe for oil and gas in some of Europe's most challenging seas in a bid to stem the steady decline in UK production, the government said.

The government hopes the companies offered licenses to drill in the rough, deep waters west of Shetland can at least slow a decade-long decline in production which made Britain a net importer over the last few years.

"These are incredibly important assets for the United Kingdom, some 20 percent of the remaining reserves are expected to be west of Shetland," Energy Minister Charles Hendry told Reuters in an interview.

"The contribution that these can make to our national economy they are of immense importance... But we would not be doing it if we didn't think it could be done safely."

The European Commission has suggested a temporary freeze on new deep water drilling and tougher rules in response to BP's Deepwater Horizon disaster in the Gulf of Mexico which led to the worst oil spill in U.S. history.

But the UK government -- which granted a total of 144 exploration licenses in its 26th licensing round on Wednesday -- says UK regulations were among the toughest in the world before the disaster in April and have been tightened since.

"The regime we have in place is the strictest in the world, the Norwegians and Britain are seen as having the strictest regime," Hendry told Reuters.

"We have increased the number of inspectors and inspections and on that basis we believe we have taken appropriate measures for deep-sea drilling to go forward."

Britain's offshore operating rules were tightened after the Piper Alpha platform exploded in the North Sea in 1988, killing 167 people in what remains the world's worst offshore accident for human casualties.

Britain's oil and gas output has been in decline since 1999 and the government expects production to fall more than a quarter from 2009 to 2015 unless new reserves -- which some estimates put at over 20 billion barrels of oil equivalent -- can revive it.

The latest licensing round, launched in January, offered blocks in all Britain's territorial waters for the first time in 12 years and tax incentives to explore some deepwater areas for natural gas.

"What we are keen to see is measures put in place that will stimulate investment," Hendry said.

"Whilst in the long term, we want to decarbonise our energy system, we have moved swiftly to offer these licences as we must realise the optimum value from the UK's energy resources and ensure secure energy supplies," Hendry said in a statement.


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