Following the UK’s general election result on 8
May, the re-elected Conservative party has vowed to support
the shale gas and hydraulic fracturing (fracking) industry,
especially in the north of England.
After securing an unexpected overall majority,
the party will be able to implement its manifesto, which
pledges to support the UK’s shale industry in a
bid to boost domestic energy production and decrease dependency
"We will continue to support the safe development
of shale gas, and ensure that local communities share the
proceeds through generous community benefit packages," the
Conservatives’ 2015 manifesto outlined.
Measures to support fracking, which has struggled
to take off since restrictions were lifted in 2012, as well as
the North Sea oil and gas industry, were outlined by the
UK’s Chancellor of the Exchequer, George Osborne,
in March, as part of the Budget 2015.
The Chancellor threw a lifeline to those working
to develop domestic energy sources, promising to cut oil taxes
and create an investment allowance that could kick-start new
Following a drop in oil prices and record-high
costs, investment in the North Sea oil and gas sector has
stalled, with oil output from North Sea fields falling to its
lowest level since production began in the mid-1970s.
Since rig counts are often used to assess general
demand for drilling mud minerals, the measures announced are
also likely to increase the call for minerals such as barite
(barytes) and bentonite.
"It is clear to me that the fall in the oil price
poses a pressing danger to the future of our North Sea industry
unless we take bold and immediate action," Osborne announced
when presenting the UK’s 2015 Budget.
As part of a set of measures to stimulate oil and
gas production, the UK government will introduce a single tax
allowance to encourage investment in all stages of the industry
and invest in new seismic surveys in under-explored areas of
the UK Continental Shelf.
From 2016, the petroleum revenue tax will be cut
from 50% to 35% to support continued production from older
fields and the supplementary charge will also be cut from 30%
to 20%. This latter move will be backdated to the beginning of
January, amounting to £1.3bn ($2.05bn*) of support.
"The Office for Budget Responsibility expects
[these measures] will boost production by 15% by the end of the
decade," Osborne said.
The UK’s North Sea oil and gas
sector is thought to be worth around £5bn a year to the
Chancellor of the Exchequer, George Osborne,
announced a raft of measures to kick-start North Sea
Oil price plunge
Osborne’s measures respond to calls
from the industry, which has experienced a 60% drop in oil
prices since June last year. Brent crude prices stood at around
$58/barrel (bbl) in May, having fallen from $115/bbl just nine
This huge drop in oil prices occurred after
the Organization of Petroleum Exporting Countries (OPEC), which
controls nearly 40% of the world market, failed to reach
agreement on production curbs in June 2014.
Since then, the impact has been felt by more than
just those exploring and extracting oil and gas. Those
supplying the industry with drilling mud minerals, such as
barite, bentonite, calcium carbonate and graphite, or
proppants, such as frac sand or
ceramic-based versions, have also been affected by reduced
The government’s announcement is
therefore likely to be welcomed by those hoping to supply North
Sea projects, such as Schlumberger subsidiary M-ISWACO, which
announced plans for a new Scotland-based barite mine earlier
M-I SWACO is hoping to produce 120,000 tpa barite
to replace increasingly expensive mining from its nearby Foss
mine, which has been in operation since 1985 at a rate of
around 42,000 tpa.
Budget 2015 reaction
The response to the Chancellor’s
pledge to support North Sea developments was, for the most
part, positive, with many welcoming the renewed investment and
job creation the measures should bring.
A group known as CBI, which speaks on behalf of
190,000 UK businesses, said that while the move is helpful for
promoting new investment, concerns surrounding low oil prices
"The oil and gas industry, which supports 450,000
UK jobs and is a major contributor to GDP, has been given a
much-needed boost with the reduction to the supplementary
charge and other incentives," commented John Cridland, CBI
"This will help address concerns over
job losses and investment freezes, but pressures remain
due to low oil prices," he added.
Industry body Oil & Gas UK also welcomed the
news, stating that the UK will "continue to rely on oil and gas
for the majority of its energy supply for many decades to come
so this action, which will help to maximise recovery of that
resource, is both sensible and far-sighted."
Meanwhile Pat Rafferty, Scottish secretary for
the UK’s largest offshore trade union, Unite,
said, "We are clear that economic reform of the North Sea must
go hand-in-hand with sustaining jobs and strengthening
employment and workplace health safety rights".
"It is a great shame, however, that the tax
increases previously announced by the Chancellor, and the
punitive tax burden it placed on the sector, had such a major
impact, exacerbating the issue of global low oil prices and
leading to the loss of thousands of jobs," he added.
Environmental campaign group Greenpeace was not
so welcoming of the news, stating that "there’s no
point fooling ourselves that North Sea oil has a long-term
"The move towards a low-carbon economy has to be
handled carefully so that workers in obsolete industries are
not abandoned to the mercy of the markets (…)," said
Greenpeace UK executive director, John Sauven.
To learn more about how plummeting oil prices
are affecting industrial minerals supply and demand around the
world, contact Emma Hughes, Special Projects Editor
Research has released a series of reports
focusing on oilfield minerals including proppants and
*Conversion made May 2015