|Photo credit: DC Productions/Getty Images/Thinkstock|
Canadian oil and gas company CNR International, Inc. is looking to take advantage of a recently introduced tax break and invest more than $470 million in one of the oldest North Sea oil fields. The company is hoping to extend the life of the Ninian field, located 240 miles north east of Aberdeen.
The company, which is a division of Canadian Natural Resources, stated that the project would allow it to boost production by adding another 27 million barrels of oil equivalent per day. In addition, the investment would be beneficial in a broader sense as it would create and protect hundreds of jobs. The Ninian field has been in operation since 1982 and has been a source of high-value light crude oil extracted at low risk, CNR International said on its website. The new project, approved by the UK government, will enable the company to grow over the next few years.
The project has been granted a Brownfield Allowance by the British government. Under a scheme introduced last year, oil companies are entitled to an allowance to help them boost production and extend the life of already developed fields. Thanks to focusing on existing assets, significant investments have been made in the UK North Sea since 2012 by several major firms, including British exploration and production company Enquest. Another company, Norwegian Aker Solutions, won a contract to help redevelop BP's Schiehallion field as well as the Loyal field. Meanwhile, oil engineer Amec secured multimillion contracts to install two new platforms in the North Atlantic, west of Shetland.
Brownfield Allowance is just one of the tax-break initiatives that the UK government has implemented to boost investment in the North Sea, as oil and gas firms are trying to ramp up production and meet increasing energy demands. According to British trade body Oil & Gas UK, investment in developing new fields and extending existing assets reached the highest level in three decades at almost $18 billion last year and is expected to exceed $20 billion in 2013.
The trade body also noted that confidence remained positive in the first quarter of the year among companies operating in the North Sea, with the confidence index standing at 60 over the period. Readings over 50 are considered positive, Oil & Gas UK explained.
According to Oonagh Werngren, operations director at the trade body, there was a notable improvement in confidence among both operators and contractors regarding the future of the sector, but the organization's poll found that contractors were more optimistic than operators.
However, the International Energy Agency (IEA) is predicting a significant decline in production in the North Sea over the summer, when operators are planning maintenance works. In its latest monthly report it predicted that over the next few months, oil fields in the area will produce lower amounts than the average in recent years. Between May and September 2013 production is expected to be cut by 330,000 barrels per day, compared to an average drop of 260,000 between 2006 and 2012.