MINISTERIAL FOREWORD

FOREWORD

by John Battle, Minister of State for Science, Energy and Industry

John Battle I am delighted to introduce the latest edition of the Brown Book (Volume 2 of the Energy Report). This is the twenty-fifth year that the Brown Book has been published. The first Brown Book in 1973 consisted of thirteen pages of text and a map showing a scattering of exploration areas, discoveries and field developments. The industry has certainly come a long way since those early days.

The first sentence in the 1973 report, by the Minister for Industry at the time, read "Our North Sea oil and gas resources are potentially of enormous importance to the economy, and there is naturally widespread public interest in them". He was right on both counts.

But, at that time, no one could have forecast the extent of the contribution which oil and gas production from the United Kingdom Continental Shelf (UKCS) would make to our economy and to our whole way of life. This can be attributed mainly to the significant discoveries offshore that have been exploited so successfully. The advance of technology has enabled the economic production of far greater reserves than originally expected back in 1973. Indeed, the exploitation of petroleum resources on the UKCS has been one of the great success stories of UK industry over the past thirty years.

With a record number of 186 offshore fields in production at the end of 1997 (98 oil, 75 gas and 13 condensate), there are some 31,000 people directly employed on offshore activities. Indeed, the UK Offshore Operators Association have recently estimated that a total of 382,000 jobs depend directly or indirectly on the offshore oil and gas industry, of which 126,000 are in Scotland - equivalent to 6.6% of total Scottish employment. A further indication of the impact the industry makes to the economy is that in 1997 the industry contributed about 16 per cent of total UK industrial investment. Despite lower oil prices in 1997, the industry still accounted for just over 2 per cent of the UK’s Gross Domestic Product. More information on the economic impact of the industry can be found in Chapter 2.

The Chancellor announced in his July 1997 Budget that the Government proposed to cut the gas levy to zero, with full effect from April 1998. In his March 1998 Budget he announced that it had decided to implement this by abolishing the levy from April 1998, with a backdated reduction applying to the current year. I welcome abolition because the levy has distorted the market and meant consumers suffered through higher prices. I also welcome the Chancellor’s announcement that he will consult on proposals for reform of the North Sea fiscal regime. This will give those potentially affected ample opportunity to give their views and ideas on specific options and will continue the helpful dialogue between the oil companies and Government. More information on the fiscal regime applying to oil and gas production on the UKCS can be found in Chapter 2.

The contribution which oil and gas have made to twentieth century life is often undervalued. At my regular meetings with oil and gas industry representatives since taking office, I have been encouraging them to be more outward-looking in entering into dialogue with external audiences on how the industry is perceived. People need to be more aware of the positive contribution which oil and gas makes to their daily lives. This means that the industry should be prepared to talk openly about what it does, both in terms of highlighting its achievements and in responding constructively to criticism.

Oil and gas not only meet a substantial proportion of the world’s fuels needs but also provide the raw material for a wide range of products, from plastics to medicines. Technologies developed from the offshore industry have also found a range of other uses, from effluent treatment systems to video camera lenses. Our lifestyles, as well as our standard of living would be the poorer without the industry.

As a new Government, we started by assessing the situation we inherited, in order to take stock, map out and reinforce key oil and gas policies and priorities. A continuing programme of licensing is essential to maintain industry interest in UK reserves in the face of competition from other oil and gas provinces elsewhere in the world. I therefore announced in July 1997 a programme of future licensing rounds into the next century. This was intended to give the industry confidence in the continuing stability of the licensing regime and in the future of the UKCS as a major oil and gas province. More information on the future UKCS licensing programme and regime can be found in Chapter 3.

Perhaps the greatest challenge faced by both Government and industry in the future is the reconciliation of our need to use energy - and particularly hydrocarbons, which are still the most widely available and convenient fuel source - and the need to protect the environment. This Government is determined that environmental and safety considerations will remain at the forefront of the industry’s activities.

With this in mind, I decided that the regulations to implement the EU Environmental Impact Assessment Directive (85/337/EEC) as it applies to offshore oil and gas projects on the UKCS should introduce now the thresholds which must apply under the amending Directive (97/11/EU), which must be implemented by March 1999. This decision has meant that, from the date the present regulations came into force in April 1998, all proposals for developments and pipelines above the threshold size, as well as other well, development and pipeline projects judged likely to have significant effects on the environment, have required the submission of an environmental statement which has been subject to public consultation. More information on environmental safeguards can be found in Chapter 4.

In twenty five years the Brown Book has become an important source of information on the development of the UK’s oil and gas resources. I intend to improve wherever I can the amount and quality of information published on this vital sector of our economy. I hope this latest edition of the Brown Book will prove useful to all its readers.