March 11 2014 Latest news:
Shaun Lowthorpe, Business editor
Thursday, March 7, 2013
Energy industry leaders insisted yesterday they wanted to work with local firms and communities to make the most of the job opportunities available in the southern north sea for both gas and offshore wind. - but keeping costs down would be critical to any success.
That was the message relayed to more than 500 delegates at the East of England Energy Group Southern North Sea conference at the Norfolk Showground.
Halfdan Brustad, vice president for wind projects at Norwegian firm Statoil, one of the firms behind the Sheringham Shoal wind farm, said major contracts would be awarded for the Dudgeon wind farm project 32km off Cromer from the middle of next year.
But key to the success of the project was working with local businesses, while the firm was also planning to follow up its previous community work.
“At Sheringham we had a community fund and we will have the same at Dudgeon,” he said. “We have spoken to North Norfolk District Council and we will try to find a way to support some local programmes.”
But he said that the commercial criteria for the scheme would need to be the same as oil and gas projects.
“The main driver is the capital expenditure,” he added. “What we are looking at is larger turbines.
“We need to improve the logistics.”
John Sewell, operations manager at independent oil and gas firm Perenco UK, said: “Our strategy is to use local service provision where we can. We want to use you guys in the region where we can, where it’s value for money - it doesn’t mean the cheapest but it does mean value for money.”
In 2012 Perenco spent £180m on its Southern North Sea operations of which £62.5m was in the East of England, however with the firm spending £482m overall, the final value to the region’s firms could be even higher.
But Mr Sewell warned that with prices rising and production levels falling controlling costs would be key, and he urged firms to “think long-term, not short-term”.
And he also questioned the costs of red tape linked to health and safety and environmental legislation.
“We are not trying to put any companies out of business by driving their prices down,” he said. “We, like you, need to stay in business, but if you want us to continue working in the region for the next 20 to 30 years, one of the challenges we have got is managing our costs, you have to help us with that.
“This is ‘dash for gas two’,” he added. “There is a great future ahead ..as long as we can keep the prices down. It’s a significant problem for us - we need you guys to help us try and address that rising trend.”
He said the industry had not been helped by government taxes imposed in 2011, though the situation had improved with measures to stimulate the sector at the last budget.
“The government gave us a good old kick where it hurts, without any consultation with the industry and effectively put the tax rate to 62p,” he said. “Not many companies will be paying 81pc on their profit rates.
“It sent a message through the industry that this government wasn’t serious about the long-term recovery of indigenous reserves.
“For me the government acted like a government of a third world country. Another kick in the proverbials was when they announced that budget change was that they kept the decommissioning tax at 50pc
“It still begs a big question as tho why the UK continental shelf continues to pay corporate tax of 30pc, when other UK companies pay 23pc - why should we be disadvantaged like that against other industries?”
He also decried the costs and time linked to inspections to offshore assets as “obscene” at times.
“We have got to do it right, but there must be a better way,” he added.