UKCS Risks Still Around the Corner Despite Scottish Vote, Says Wood Mackenzie

Scotland chose to remain part of the United Kingdom, with 55% voting against the independence. Several market participants said that the vote has removed a source of uncertainty. On the other hand, according to Wood Mackenzie, risks for offshore assets remain around the corner.

‘Wood Mackenzie says although the vote has removed an element of uncertainty for companies who own and operate assets in the UK Continental Shelf (UKCS), there are still major challenges that need to be addressed and despite a 'No' vote the UK's upstream industry is still facing significant change in the UK,’ reads a note released on Friday.

Underperformance on the UKCS is the main concern raised by Wood Mackenzie.

‘Coupled with production underperformance, recent UKCS exploration has also been disappointing. Poor exploration performance has resulted in less than 330 million barrels of oil equivalent (mmboe) of reserves discovered since 2011. This trend is set to continue with only 19 exploration wells spudded to date in 2014. Exploration success and new discoveries are instrumental in replacing produced reserves, slowing production decline rates and maintaining a healthy project pipeline. If these issues are not tackled, the longer term outlook for the UK is worrying.’ 

The consultancy group called for a simpler legal framework and tax incentives for harder to produce reserves.