British fuel chief warns of 'energy crunch'

The UK faces an “energy crunch” if steps are not taken to help the oil and gas industry, a leading figure warned today.

Malcolm Webb, chief executive of industry body Oil and Gas UK, spoke after figures revealed falling investment and rising costs in the industry.

Mr Webb said that if the British government did not act, billions of barrels of oil and gas could be left undiscovered, increasing the country’s dependence on imports.

And he repeated the body’s warning from last year that 50,000 jobs could be at risk in the industry.

The comments followed the publication of Oil and Gas UK’s annual economic report, which showed investment in the industry fell to £4.8bn (€5.55bn) in 2008 - down £1.2bn (€1.4bn) since 2006.

And Mr Webb warned that investment could drop below £3bn (€3.5bn) in 2010.

There was also a sharp slowdown in exploration, which for the first half of 2009 was down 57% on the same time last year.

Oil and Gas UK said the figures supported the call from the House of Commons Energy and Climate Change Committee for more investment incentives. Today Mr Webb called for more help from the Department of Energy and Climate Change and the Treasury.

He said that increased investment would only come if costs fell, the tax burden was eased, and problems in the banking sector resolved.

Mr Webb told a press conference that “if we don’t see a turnaround soon those 50,000 jobs frankly are still at risk”.

He said: “We have had the credit crunch, next we will have the energy crunch.”

He said that while changes to the tax regime in this year’s budget were a “step in the right direction”, they were not enough to lead to a rapid increase in activity.

He said: “The Department of Energy and Climate Change and the Treasury must work together to introduce further measures addressing these worrying trends in exploration and investment.

“We fear that if they do not, the rate of decline in production will accelerate, leaving billions of barrels of oil and gas in the ground, perhaps never to be recovered.

“Similarly, any fall in investment will stunt the growth of our supply chain which relies on UK Continental Shelf business to provide the foundation for its export activity. The UK simply cannot afford to allow this to happen.”