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BP deepwater drilling plan gets go-ahead

22nd March 2012

Deepwater drilling given new backing as UK earmarks millions to the oil industry in its 2012 budget.

UK government gives BP consent to start drilling in deepwater off the Shetland Islands

The UK government has agreed BP can begin deepwater drilling in the North Uist well, off the Shetland Islands. The announcement comes a day after the UK government pledged GBP 3bn in fresh allowances for drilling new large and deep fields as part of its 2012 budget.

No objections were raised to the North Uist bid after a thorough examination by the UK Department of Energy and Climate Change (DECC). The environmental impacts of drilling in the area, as well as BP's emergency response measures, were scrutinised with the help of maritime and environment groups, said DECC.

The North Uist well is 125km northwest of the Shetland Isles in a water depth of approximately 1,290m.

BP was required to provide detailed confirmation that they have taken into account the findings and recommendations of the various Macondo investigation reports, commissioned after the Deepwater Horizon oil spill in 2010.

For example, BP had to present information on blow-out Preventer (BoP) management, inspection and independent verification; auditing of well cementing procedures and overall communications, management responsibilities and interaction with key contractors.

As part of the UK 2012 budget announcement on 21 March, UK Chancellor George Osborne also pledged to provide the oil industry with financial support to dismantle old platforms.

"We will end the uncertainty over decommissioning tax relief that has hung over the industry for years by entering into a contractual approach ... We are also introducing new allowances including a £3bn new field allowance for large and deep fields to open up west of Shetland, the last area of the basin left to be developed,” said the chancellor in his budget statement.

Over the next 30 years, approximately 500 platforms, 8,000 wells, 4m tons of steel and several hundred subsea wells, manifolds and pipelines will be decommissioned in the UK. A new strategy for gas generation is due to be published by DECC in the Autumn.

Professional services firm, Deloitte in a statement said Osborne’s proposal would “remove a major fiscal risk for UK North Sea investors and may release significant funds for investment by allowing companies to move to post-tax decommissioning guarantees”.

But environment groups fear the deep water and rough sea conditions would make a potential spill extremely hard to clean up. Charlie Kronick, senior energy advisor for Greenpeace, said: "Osborne has opened the flood gates to a new Klondike in the deep waters off Shetland without learning any of the lessons of the dangers this poses after the disaster in the Gulf of Mexico just over a year ago”.

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