Scottish government to investigate oil and gas potential of "underexplored" western waters

Out-Law News | 20 Aug 2014 | 3:37 pm | 2 min. read

Work to explore the potential for oil and gas discoveries in previously "underexplored" waters off the west coast of Scotland will begin later this year, the Scottish government has announced.

It is to team up with industry and Herriot-Watt University's Institute of Petroleum Engineering, at which a collaborative event will be held in late autumn. The project will focus on the potential for conventional oil and gas in the Solway Firth, the Firth of Clyde, the North Channel and the Sea of the Hebrides, with further exploration of the area towards Rockall possible in the longer term if this proves successful. Rockall is located in the north Atlantic, approximately 240 miles to the west of the Scottish mainland.

Oil and gas expert Shirley Allen of Pinsent Masons, the law firm behind, said that the announcement was good news for the industry, particularly if discussions planned as part of the event on the requirement for new research to help encourage exploration off the west coast proved fruitful.

"The UK government's Department of Energy and Climate Change (DECC) has granted licences over nearby waters to the north, west and south of these identified areas so there may indeed by favourable geological conditions to be found within these areas too," she said.

"This collaborative approach to undertaking further research into these areas aligns with the Wood Review recommendations for maximising the economic recovery of the UK Continental Shelf (UKCS) reserves. These areas of the UKCS have not benefitted from a great degree of investment in exploration or drilling activities to date, but perhaps now is the time for change," she said.

While over 3,000 exploration wells have been drilled to date in the North Sea to the east of Scotland, and to the west of Shetland, only around 20 such wells have been drilled to the west of the Scottish mainland. According to Professor John Howell, chair of geology and petroleum geology at the University of Aberdeen, this area contains "several major basins with hydrocarbon potential", many of which have not yet been explored at all.

In his report on how to maximise future oil and gas production, industry expert Sir Ian Wood recommended the adoption of a new shared strategy between industry, government and a new regulator, based on recovering the maximum amount of oil and gas from UK waters as a whole rather than from each individual licence block. The UK government, which has accepted these recommendations in full, has also committed to work with the new regulator on a broad review of its tax treatment of the UKCS in order to "ensure that it continues to incentivise economic recovery as the basin matures".

"Stimulating oil and gas activity to the west of Scotland could create employment and further increase the longevity of the industry in the country," said Fergus Ewing, the Scottish government's energy minister. "Furthermore, any future activity will be supported by Scotland's world-class indigenous supply chain with 40 years of experience in the North Sea."