YESTERDAY’S update from Aberdeen-based Faroe Petroleum provided fresh evidence that firms with cash are finding plenty to invest in in the North Sea even faced with the prospect of a long period of low oil prices.
Assets such as oil and gas fields are on the market at bargain prices. The price of support services has fallen to attractively low levels amid the downturn that has accompanied the slump in oil prices since 2014.
However, if Faroe is anything to go by, the vast bulk of the work the activity of the spenders may generate for the supply chain is likely to be concentrated on the Norwegian side of the border.
Faroe is excited about the potential it sees to bring a big find it made in Norway into production. It is looking forward to drilling more wells there.
Both activities could create valuable work for services firms that have been hit hard by the fallout from the crude price plunge.
Faroe made clear it is interested in buying into UK fields that are already in production. This could allow it to utilise tax losses without having to invest much.
But it said nothing yesterday about bringing UK discoveries into production or hunting for new ones.
Exploration and development approval levels plumbed record lows in the UK last year.
Many firms are likely to remain risk averse until the outlook for crude prices becomes clearer.
Against that backdrop, the disproportionate interest in Norway reflects the fact explorers get generous tax breaks in the country, where they can recover 78 per cent of the costs involved.
The relief encourages firms like Faroe to do the kind of exploration work near existing facilities off Norway that can help create a pipeline of development work.
If he really wants to kick start activity in the UK, the Chancellor may have to think about introducing something similar in the UK in his Budget in November.
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