Oil and gas production rises for first time in 15 years

The chief executive of Oil & Gas UK has welcomed the first increase in production on the UK continental shelf for over 15 years.

Deirdre Michie, however, has warned the industry will be "extremely challenged" to sustain growth in 2016.

Oil & Gas UK predicts oil and gas production increased by 7% in the past twelve months.

The Scottish government described the news as a "positive sign" for the industry.

The increase in production follows more than £30bn of investment in the past few years.

Ms Michie said: "Government data for the first ten months of 2015 shows that the total volume of oil and gas produced on the UK continental shelf (UKCS) was up 8.6% compared with 2014, with the production of liquids up 10.6% and gas up 6.1%.

"Output in November and December tends historically to be more stable, but even so, Oil & Gas UK now expects year end production for the full year of 2015 to be seven to eight per cent higher than last year.

"Given the difficulties being faced by the industry this is welcome news.

"In February 2015 we predicted a marginal increase in production for 2015, but the industry-wide focus on improving production efficiency coupled with investments of more than £50bn over the last four years to bring new fields on stream across the last twelve months is paying off and yielding a better result."

Ms Michie predicts that there will be job losses in the industry in 2016, but the UK continental shelf still holds great importance.

'Real progress'

She added: "The upturn underlines the industry's commitment to the UKCS - which still holds great promise for the future and is vital for the country's security of supply.

"For example, only last week, oil company Taqa announced first production from the Cladhan field north-east of Shetland, estimated to produce 10,000 barrels of oil a day from the UK's waters."

A spokesman from the Scottish government said: "This rise in oil production is a positive sign that the industry is making real progress. However we are very concerned about the possibility of the oil price remaining lower for longer as it would have serious implications for the industry.

"A series of measures are needed to sustain and encourage investor confidence including tax measures from the UK government.

"The Scottish government is doing all it can within devolved powers to support the industry - especially those workers who been affected most directly by the current challenge."

A UK government spokesman said: "We are committed to supporting our oil and gas industry, and the increase in production last year clearly demonstrates that the UK continental shelf still has plenty to offer.

"We announced a package of support early last year that is expected to encourage over £4bn of additional investment over the next five years.

"We also recently set out our strategy to maximise economic recovery through better collaboration between companies and improved cost-efficiency."