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By Sarah Young
LONDON, Nov 11 (Reuters) - Britain should set up a newregulator that would encourage oil and gas companies tocollaborate to help counter plunging North Sea production rates,a government-commissioned review said in its initial findings onMonday.
The government launched the review of the North Sea, thefirst in more than 20 years, after output plunged by a thirdfrom 2010 to 2012. While production has been in decline since1999, the big drops in recent years have acted as a drag oneconomic growth.
Led by Ian Wood, former chairman of FTSE 100 oil servicescompany Wood Group, the review outlined a plan to pump anextra 3 billion to 4 billion barrels of oil equivalent (boe)than would otherwise be extracted over the next 20 years.
The plan involves establishing an "arm's-length" regulatorybody that would drive collaboration between different companies,maximising the barrels pumped.
Industry experts have long said that Britain's North Sea,with its large number of operators, would be more efficient ifthere were more coordination between smaller companies and iflarger companies were encouraged to allow other parties accessto infrastructure they own.
The extra barrels, equivalent to at least 17 percent moreproduction than the current estimate of 18 billion barrels stillto come from the North Sea, would bring over 200 billion pounds($320 billion) of additional value to Britain's economy, thereview said.
"It is essential for the UK's future growth and prosperitythat we maximise recovery of our offshore oil and gas resource. It is therefore crucial that industry and government act now toinvest in this shared vision if they are to achieve thesegoals," Wood said in a statement.
The government's Department of Energy and Climate Change(DECC) would set up the body with "additional powers" to forcecollaboration and coordination between companies.
The companies, which the review recommended would fund thenew regulator, would commit to collaborate in certain areas suchas sharing pipelines.
Companies and government will now have an opportunity tocomment on the initial findings before Wood publishes his finalreport early next year.
With the North Sea in its fifth decade of pumping oil andgas, new discoveries tend to be small and costly to exploit,while old platforms and pipelines need more maintenance, cuttingoutput and profits.
The biggest oil companies, such as BP and Shell, are still active in the region but are concentratingon new projects off the West of Shetlands. The older areas,where there is less oil left to be extracted, are managed bydozens of smaller companies such as EnQuest.
Industry experts also have said squeezing every last drop ofoil out of the North Sea will depend on appropriate taxincentives.
Recommendations on taxation, however, were not within thescope of Wood's review.
