21st Mar 2014 06:59
LONDON (Alliance News) - BG Group PLC and Maersk Oil UK have announced that changes set out in the UK Budget have allowed them to develop two new high pressure high temperature projects in the North Sea.
According to a report from the HM Treasury, the projects will lead to an investment of GBP6 billion across the new fields and both Maersk and BG estimate that the sites will create more than 700 jobs, with 8,000 more jobs being supported along the supply chain.
?BG Group welcomes the new proposals which improve the prospect of the Jackdaw gas discovery being developed," Managing Director of BG Group's European upstream business Andy Samuel said in a statement on Friday. "If approved, Jackdaw would make a significant contribution to UK gas security of supply, support thousands of UK-based engineering and construction jobs and help develop highly technical skills for many UK companies.?
The company's Chief Executive Chris Finlayson said in February that BG was considering developing the Jackdaw field, which could form a major new hub in the UK North Sea.
BG Group also said at the time that it plans to invest around GBP1 billion in developing its UK asset base in the North Sea over the next three years.
The decision comes after UK Chancellor of the Exchequer George Osborne Wednesday moved to encourage firms to seek out remaining North Sea oil and gas reserves, pledging financial support for drilling in more expensive and more difficult ways.
In his annual budget, Osborne announced a new allowance for ultra high pressure, high temperature oil and gas projects.
High pressure, high temperature wells have potential pressure of greater than 15,000 pounds per square inch with a potential flowing temperature of greater than 177 degrees Celsius at the wellhead. The sites are technically more difficult to develop but can reach reservoirs that are deeper and further away than ever before.
HM Treasury noted that the gas produced from new HP/HT fields could provide 10% of the UK?s gas demand when operating at peak rate.
The budget statement said that the process should support the development of these major projects in the UK North Sea particularly, leading to further jobs, providing a significant portion of UK gas demand and generating billions in capital investment.
Meanwhile, The Times newspaper Friday reported that the oil and gas explorer is set to cut almost 300 jobs in Britain, following the profit warning confirmed in the company's full-year results February 4. The newspaper said BG is planning to cut around a quarter of the staff at its head office at Reading, England. Further significant reductions are being made in Australia, it said, where the firm is building a series of liquefied natural gas projects and where it employs about 1,000 people. The UK daily did not attribute a source, although quoted a spokesperson, ?We continuously review all areas of our business, including staffing, to ensure the business has the appropriate resources.?
HM Treasury separately stated that EnQuest PLC, another major oil company, has Friday confirmed the award of a contract to Aker Solutions that will secure 150 new jobs, including 50 new positions at a newly established services base in Aberdeen.
The contract is part of EnQuest's GBP4 billion investment in the UK North Sea's Kraken oil project, which is expected to support 20,000 jobs through its construction phase.
The budget statement also announced a review of the UK's tax treatment of the North Sea to ensure that it continues to incentivise economic recovery as the basin matures. The Treasury said that tax incentives for UK oil and gas projects in 2013 led to a further GBP7 billion in investment during the year.
HM Treasury said that, as part of the new budget incentives, for every GBP1 billion a company spends on these projects, they will get at least GBP200 million in tax relief.
The UK government has been heavily pushing oil and gas investment in recent years as it attempts to begin to reduce high energy prices. In January, UK Prime Minister David Cameron said that English authorities will receive 100% of the business rates collected from shale gas schemes, instead of the usual 50%, while in 2013 the government said that local communities could receive GBP100,000 when a test well is fracked in their region.
BG Group shares last traded at 1,065 pence per share.
EnGuest last traded at 142.5 pence per share.
By Tom McIvor; [email protected]; @TomMcIvor1
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