NE Scotland, Orkney & Shetland

North Sea offshore drilling 'down by a quarter' in 2011

oil rig
Image caption Deloitte said five exploration and four appraisal wells were started in the UK sector

Drilling activity in the North Sea has fallen by a quarter at the start of the year, according to figures released by financial consultants.

Deloitte said five exploration and four appraisal wells were started in the UK sector between 1 January and 31 March.

This compared with a total of 12 during the final quarter of 2010.

Deloitte said any impact from the recent Budget announcement of a £2bn tax to fund a fuel duty cut was unlikely to be seen until later.

"It is important to clarify that we are talking about a relatively small number of wells that were drilled during the first quarter of the year - the traditionally quieter winter months - so this is not, in itself, an unexpected decrease," Graham Sadler, managing director of Deloitte's petroleum services group, said.

"The lead-in time on drilling planning cycles can be long - even up to several years - so any impact from the recent changes to fiscal terms are unlikely to be seen until much later in the year."

'Full effect'

He added: "What is clear is that despite the decrease in drilling activity towards the end of last year, and during the first months of 2011, the outlook for exploration and appraisal activity in the North Sea appeared positive.

"The oil price continued to rise and there were indications that this, combined with earlier UK government tax incentives, was encouraging companies to return to their pre-recession strategies.

"Since the Budget, a number of companies have announced that they intend to put appraisal and development projects on hold and we will have to wait to see the full effect of this change on North Sea activity levels over the coming months."

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