North Sea oil grip challenged

A FIERCE David and Goliath row is brewing in the North Sea amid calls for the Government to break the grip held by the global oil giants or risk deterring billions of pounds of new investment.

Senior industry figures are concerned that so-called 'supermajors' - BP, Shell, Exxon and Total - are sitting on fields to reap the revenues fuelled by the sky-high crude price and frustrating smaller new companies desperate to take over and search for more oil.

Up to 30bn barrels are left under the North Sea and there are mounting fears they could go undiscovered as potential investors turn to other opportunities elsewhere in the world.

This could have severe repercussions on the economy as the UK edges ever closer to becoming a net importer of oil and gas.

Representatives of the UK Offshore Operators Association met Treasury Paymaster General Dawn Primarolo yesterday to thrash out plans on how to access remaining reserves.

Insiders believe the Government should either alter the licensing regime or the current tax structure to force companies to sell assets if they fail to invest enough on exploration.

Trade union Amicus is drawing up proposals for a sliding tax system based on the current 10% levy on North Sea profits, which it hopes to present soon.

Graham Tran, regional officer, said: 'If it wasn't for BP and Shell, we wouldn't have an industry but if the North Sea is no longer their key area then it's time to move on. Use it or lose it.'

BP, Shell, Exxon and Total are all scouring the globe for new profit centres but the four hold half the acreage in the North Sea and reinvest an average of only 20% of the cash flow.

New entrants such as Apache, Encana and Talisman Energy have crossed the Atlantic in recent years in the hope of making oil finds no longer big enough to interest the supermajors.

Paul Blakeley, vice president of Talisman, said he was now having to look for fields in the Norwegian sector of the North Sea. 'Companies are under no pressure to hand over assets they no longer invest in. Asset trading in the North Sea is at an all-time low, which shouldn't be the case.'

The Government operates a fallow field initiative whereby companies risk losing fields if they fail to develop them.

A Treasury spokeswoman said the Chancellor had already introduced tax breaks to encourage exploration, while Shell insisted the North Sea was still one of its 'strategic heartlands'.

Crude price hits new highs

OIL prices surged through yet another set of record highs today amid fresh concerns about shortages of petrol stockpiles for the summer.

London trading saw Brent jump to $38.60 a barrel, a 13-year high, while Nymex crude set a record at $41.22. Both eased back but threatened new peaks later.

Steadfastly remaining at over $40 a barrel in recent days, the oil price has been at its highest since the first Gulf war. The price is underpinned by strong demand from China and the shortfall in petrol supplies for the US market ahead of the summer holiday period, when American families flock to the coasts and countryside in their cars and Winnebagos.