BP and partners announce $500m Clair field appraisal

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A consortium of oil companies is to invest more than $500m (£330m) in an appraisal drilling programme which could lead to further development of a giant Atlantic field.

The BP-led consortium said drilling had already started on the first of five wells planned over the next two years at Clair, west of Shetland.

Up to 12 wells could be drilled, depending on initial results.

The news came as the UK government unveiled a new oil and gas strategy.

BP's partners in the appraisal drilling programme are Shell, ConocoPhillips and Chevron.

It is the latest in a series of announcements, aimed at transforming the Atlantic's role as an oil-producing region.

Clair is already known as a "monster" field, holding eight billion barrels of oil.

However, it has been technically difficult to bring ashore.

Although the field was discovered more than 35 years ago, production did not start until 2005.

The offshore oil and gas sector is enjoying a second wind.

For governments at Westminster or Holyrood seeking growth, it's a powerful global industry and one worth cultivating.

Similar to the Scottish government's approach, the UK government strategy has identified a skill shortage as a key challenge, along with ensuring the supply chain is strengthened in the UK, exploiting extensive export opportunities.

The strategy's stress on fiscal stability is what the industry most wanted to see, reflecting the two years spent by ministers repairing relations with the industry, which were badly damaged by the surprise raid on offshore profits in the 2011 Budget.

There also needs to be work done on links with the finance sector. Despite big investment in known assets, the recent drilling success rate has not been good in UK waters, making financiers wary.

The news today from North Sea drilling firm Trapoil regarding offshore fracking plans demonstrates the tension between the potential of huge new reserves from offshore fracking of shale oil and the struggle for small operators to get funding.

Last year, BP announced a further huge expansion.

The company and its partners hope the appraisal programme will lead to a third phase, taking production well beyond 2050.

New oil would continue to be pumped by pipeline to Shetland.

BP North Sea regional president Trevor Garlick said: "This is a major milestone and a further big commitment to the west of Shetland by BP and its co-venturers.

"If successful, the appraisal programme could pave the way for a third phase of development at Clair - this is now a real possibility."

Analysts believe that Clair - along with other developments in the area - could lead to the Atlantic overtaking the North Sea as the UK's biggest oil-producing region within 20 years.

Meanwhile, the new oil and gas strategy aimed at securing thousands of jobs and billions of pounds of investment was unveiled by UK Business Secretary Vince Cable in Aberdeen, which is known as the oil capital of Europe.

He addressed business leaders alongside Scottish Secretary Michael Moore and UK Energy Secretary Ed Davey.

The three secretaries of state outlined plans for "tax certainty", supply chain support and skills development.

Skills shortage

The government also announced a £7m commitment to help establish the Neptune offshore technology centre of excellence in Newcastle.

Mr Cable, who opened a facility at offshore specialists Expro in Aberdeen, said: "I want us to consider what barriers are stopping British companies bidding for and winning work in the North Sea. This is an expanding industry. We can either help create more jobs and opportunities across the UK if we get this right, or see work going overseas if not."

The oil and gas industry employs about 400,000 people and provides nearly half the UK's energy needs, the government said.

The strategy states that government will work with the industry to tackle a looming skills shortage, partly by re-training military leavers to fill some of the 15,000 new jobs expected to be created in the oil and gas sector over the next five years.

It also says that perceptions of the industry are "out-dated and inaccurate", and the government will back a campaign to highlight its significance.

It pledges to encourage more technological advancement through research and development, and also to improve the ability of small and medium-sized businesses to access finance.

'Strong collaboration'

Malcolm Webb, chairman of industry body Oil and Gas UK, said: "The strategy fosters strong and meaningful collaboration between the government and industry and will help to focus efforts on addressing particular areas such as skills, technology and exports.

"It will further strengthen the oilfield services sector across the country, boost investor confidence, safeguard jobs and help to maximise recovery of Britain's oil and gas reserves."

Start Quote

I welcome their view that there will be a long term future for the oil and gas industry well beyond 2055”

End Quote Fergus Ewing Scottish energy minister

The future of the oil industry is key in the debate about Scottish independence.

The Scottish National Party, which forms the Scottish government, argues that the country can look forward to an oil boom in the early years of independence, assuming a Yes vote in September 2014.

Opponents warn against over-reliance on a volatile resource, prone to fluctuations in revenue.

Commenting on the publication of the strategy, Scottish Energy Minister Fergus Ewing said: "I am delighted that the UK government are following the Scottish government's lead in recognising the strength and importance of the oil and gas industry by launching their own oil and gas strategy.

"I am pleased that the UK government highlight the positive future of the industry for years to come, the extent of reserves, and the benefit to the balance of payments, and production taxes.

"I welcome their view that there will be a long term future for the oil and gas industry well beyond 2055."

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