Well Services Report 2014

9.2. Major Challenges andSuggestedActions

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Although there is optimism for the future, there are a number of challenges facing thewell services contractor sector and theUKoffshoreoil andgas industryas awhole.

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Increasingoperatingcostsareseenasakeychallenge.The Oil&GasUKActivitySurvey2014 7 revealsthatoperating expenditure on theUKCS increased by 15.5 per cent in 2013, with a further increase of 7.9 per cent forecast for 2014; a trendwhich isbelieved tobeunsustainable in the long term. The new consultation with HM Treasury on an ultra high pressure high temperature (uHPHT) tax allowance is welcomedby thewell services contractors,with theexpectation that thismeasurewill stimulatenew investment in uHPHT developments. It has also been suggested that tax benefits for the development of new technology wouldhavea significant benefit indrivingefficiencies throughout the industry. However, the announcement of the bareboat charter tax measure, which is expected to significantly increase operatingcostson theUKCS, isa factor that isdampeningoptimismwithin thesector. Thewell servicescompanies welcome the announcement in the 2014 Budget that theUKGovernment will conduct a full review of the fiscal regimeof theUKCS. The full implementationof the WoodReview 8 isalsoconsideredpivotal inensuring the futureof theUKCS. Anew, strongand fully resourced regulatorybodyhasbeenwelcomedby the sector, in thehope that thiswill encourage new investmenton theUKCS, stimulatedrillingactivityandenforcegreatercollaboration throughout the industry. It is also hoped that greater improvements in efficiency and opportunities for collaboration, in addition to alignmentof objectives throughout the industry, canbeachieved through improving theeffectivenessof industry initiatives andorganisations.

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7 Oil&GasUK’sActivity Survey2014 is available todownloadatwww.oilandgasuk.co.uk/forecasts.cfm 8 TheWoodReview ‘UKCSMaximisingEconomicRecovery: Final Report’ is available todownloadat www.woodreview.co.uk

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