Fifty years ago, Bob Dylan released his seminal album "The times they are a-changin". It described a period of great transition in America.  Half a century later, that line has seldom had more relevance to the UK Continental Shelf (UKCS) - it's a time of significant change in the history of the North Sea, 50 years on from the issue of the first licences.

Over the last year we've seen a lot of discussion about the region and its future. Some important changes have been proposed, including the Wood Review, and steps have been taken to boost the North Sea's prospects. As a result, it's been a period of serious reflection for everyone involved.

The findings of our Petroleum Services Group's (PSG) latest quarterly report, covering July to the end of September, demonstrate this well. The oil and gas industry appears to be waiting for a bit more clarity over the future of the North Sea before making any major investments in the region.

Our report found that the number of deals has dropped this quarter, both compared to the same period last year and the previous three months. There were just four in Q3 2014, compared with 14 a year ago and the five reported in Q2.

There was better news on the drilling front. Eleven exploration and appraisal wells were drilled in the last three months, which is an increase on the seven registered last quarter. This figure was also consistent with the same period last year, but it's worth keeping in mind we're starting from a low base.

What are the changes oil and gas operators are waiting for? Here are the big three:

  • Changes to the fiscal regime: Industry will be looking for measures which support the challenges of operating in the mature basin that is the North Sea. Investors are looking for a system which is more predictable, with a lower tax burden. They would also like to see incentives aimed at encouraging exploration and appraisal activity, as well as new entrants to the region. We made those views clear in our submission to the UK Government's fiscal consultation – look out for our report which analyses the results of a Deloitte survey of the current UK oil and gas fiscal framework, coming out later this month.
  • Changes to pricing and finance: The cost of operating in the North Sea has been an issue for some time. Exacerbating this has been a recent drop in the price of oil, making the economics of extraction even more difficult. Equally, one of the major contributing factors to deals decreasing this quarter has been the price differential of assets on sale. Larger players tend to be the vendors, while smaller operators, often with limited budgets, are the purchasers. At the same time, access to finance has become an issue. Combined, these factors are stalling deal activity.
  • Changes to the operating environment: The Wood Review has recommended a number of significant changes to ensure the future prosperity of the North Sea. While these have been positively received by the industry, the detail behind the implementation of these, such as the collaboration required between operators in the region and the Treasury, along with the precise role of the new regulator, remains to be seen. Companies will be holding tight until they have clarity on what all of this will mean.

There's a lot of change on the horizon for the North Sea, so it's understandable that companies may be biding their time before making big investment decisions.

Answers should be forthcoming in the not too distant future – first up might be what's contained in George Osborne's Autumn Statement and the fiscal road map for the future. After all, it could be one of the last chances to get the fiscal regime right.

What effect do you think changes in these areas will have on the North Sea? Tell me by leaving a comment in the box below or by getting in touch. You can also tweet us on @DeloitteScot.

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