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Oil and gas production by British firms has declined in 2012 and is expected to go down further in 2012, as investments in offshore projects continued to increase, according to industry body Oil & Gas UK.
A survey by Oil & Gas UK found that production declined 14 percent on year to 1.55 million barrels of oil equivalent (boe) per day in 2012. Compared to 2010, production declined by 30 percent.
In 2013, production is expected to fall further to 1.45 to 1.5 million boe per day. However, Oil & Gas UK anticipates the production to pick up over the next three to four years, rising to about 2 million boe per day by 2017.
In order to help more production, investment in oil and gas projects in the North Sea rose to a 30-year high in 2012 to £11.4bn (€13.1bn, $17.2bn). Investment will rise to £13bn in 2013 on the back of the recent tax changes introduced to help the sector, according to the industry body, which comprises of more than 320 companies.
In 2012, Chancellor George Osborne passed new relief measures, exempting gas fields in shallow waters from a 32 percent tax on the first £500m of income.
The companies are planning to invest about £100bn over the coming years, of which £44bn investments are already approved and under development, and another £50bn investments have more than 50 percent chance to get approved.
"After two disappointing years brought about by tax uncertainty and consequent low investment, the UK continental shelf (UKCS) is now benefiting from record investment in new developments and in existing assets and infrastructure, the strongest for more than three decades," Malcolm Webb, Oil & Gas UK's chief executive, said in a statement.
"The recent introduction of targeted tax allowances to promote the development of a range of difficult projects, coupled with the government's ground-breaking commitment to provide certainty on decommissioning tax relief, has prompted global companies and independent businesses alike to take another look at the UK as an investment destination and resulted in a new wave of investment. It is crucial that we sustain this momentum in the years ahead."
In line with the improvement in the tax regime, the Department of Energy and Climate Change (DECC)'s development approvals have doubled between 2011 and 2012, and more oil and gas reserves have become commercially viable for development.
However, new discoveries of reserves declined and the total reserves on companies' plans fell by half a billion boe, according to Oil & Gas UK.
"Only 21 exploration wells per year on average were drilled over the last three years. As a result, in 2012 not enough barrels were discovered to replace all those produced," Webb added.