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Brexit ‘worst case’ could nearly double cost of doing North Sea oil business

Published: 08:10 03 May 2017 EDT

Offshore oil operations, North Sea
Depending on the Brexit deal: Cost of trade could rise to £1.1bn a year, or drop to £500mln

A positive outcome to Brexit negotiations could potentially see a £100mln a year improvement to the cost of trade for the UK’s offshore oil business, but, the worst case scenario could see it nearly double to £1.1bn.

Oil & Gas UK, the offshore trade body, today released headline findings in research examining possible impacts of Brexit on the oil and gas sector.

The report found that some £73bn worth of trade presently flows between UK oil and gas and the rest of the world, with the vast majority of that, some £61bn, tied to traded goods that may be subject to tariffs post-Brexit.

It estimated that under the current ‘status quo’ the cost of trade amounts to £600mln per year.

In a situation where the UK government can secure minimal tariffs with the EU and better tariffs with the ‘Rest of the World’ the Oil & Gas UK commissioned report estimates the cost of trade could fall to £500mln.

A worst case scenario where the UK reverts to World Trade Organisation rules with the EU and Rest of World could, meanwhile, see the cost of trade rise to £1.1bn per year.

“Oil & Gas UK is an apolitical organisation representing a large and diverse membership where there will be a variety of views,” said Deirdre Michie, Oil & Gas UK chief executive.

“While the trade body can’t take a position on Brexit, we commissioned the research because we need to understand the possible impact on our industry - and the possible opportunities - from exiting the EU.”

The report also highlighted that 90% of the oil sector’s workers are UK nationals, and just 5% are EU workers (and 70% of those are deemed to be skilled workers).

Oil & Gas UK called on the government to consider the role played by skilled EU workers, which it says are often critical to UK projects, when it develops domestic immigration policy.

Michie added: “We are becoming a more globally competitive industry, but we continue to be very sensitive to any additional burdens either in relation to cost, or restrictions on the movement of key personnel required for critical operations. 

“There are still up to 20 billion barrels of oil and gas to recover from the UKCS and, if properly supported, our already world-class supply chain could double its turnover by 2035.

“Oil & Gas UK would welcome discussions with Government officials to outline industry’s concerns and opportunities and help identify a path forward during Brexit negotiations.”

“Our request of Government is that any change, whether domestic or European, is managed in a manner that minimises risk to the oil and gas industry and provides predictability and clarity wherever possible, through constructive dialogue and consultation.”

 

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