By Karolin Schaps, Reuters
Britain urgently needs its oil and gas companies to pay for a new regulatory body to encourage industry collaboration and counter plunging North Sea production rates, a government review, the first since the mid-1990s, said on Monday.
Britain's oil and gas output has fallen about two thirds since its peak at the turn of the century, but reforms could lead to 200 billion pounds ($330 billion) worth of extra oil and gas being extracted, the government said.
The North Sea is thought to contain billions of barrels of hard-to-reach oil but with many platforms and pipelines coming to the end of their working lives, time is fast running out to get at them. The review's task was outlining how to make that easier.
About 99 percent of oil and 60 percent of gas production from offshore Britain is expected to come from Scottish waters until 2040.
The first strategy assessment of the country's oil and gas potential in more than 20 years was published on the same day as Prime Minister David Cameron holds his first full cabinet meeting in Scotland, aimed at persuading Scots - who vote on secession on Sept. 18 - to stay in Britain.
The oil and gas industry, whose major North Sea operators include BP, Statoil and Shell, is expected to foot the bill for the new regulator which the government said will be set up immediately.
"I believe industry will have to pay, but in return should be granted appropriate service level agreements," said Sir Ian Wood, author of the report and former chairman of oil services company Wood Group, without providing figures.
Government revenues from North Sea production fell more than 40 percent to 4.7 billion pounds in 2012-13, underlining the sector's importance to Britain's economic recovery.
The new regulator will block any major investments that do not sufficiently focus on extracting maximum potential from North Sea fields, a move which could result in some operators losing their licences, Wood said.
Wood, whose report estimates that about 24 billion barrels of oil equivalent could still be buried beneath the UK part of the North Sea, also recommended the regulator should enforce rules for companies to share exploration data more quickly.
"I fully back Sir Ian Wood's recommendations and we will start implementing them immediately," said Britain's Energy and Climate Change Secretary Ed Davey in a statement.
A focus on more drilling for oil and gas in more remote areas could benefit companies who specialise in that area such as Seadrill, Noble or Rowan, experts in oil and gas exploration work.
"We strongly welcome the proposal for a new arm's length regulator with additional powers and resources...The report is a game changer," said Malcolm Webb, chief executive of Oil & Gas UK, Britain's fossil fuel industry lobby group.
(Additional reporting by Stephen Eisenhammer and Sarah Young; Editing by Louise Ireland)