View from City Road: Making the best of a bad job

Tim Eggar, the Minister for Energy, was in buoyant mood yesterday as he launched the Brown Book, the Department of Trade and Industry's analysis of Britain's oil and gas industry.

Oil production is rising and should reach record levels in the next three to four years; the as yet unexploited West of Shetlands area could become a 'world class oil province'; oil companies managed to reduce their production costs from dollars 7 to dollars 6 a barrel last year; and they hit oil in every fourth well they drilled - compared with a world average of one in 20.

Most intriguing, Mr Eggar said that methane extracted from coal beds could become as important as it is in the United States, where 10 per cent of all gas is produced from the coal seams. Evergreen, a Colorado- based company, is now pumping gas from the bowels of Cheshire and another six areas are being investigated by Evergreen and others. It would be ironic if the future contribution of coal reserves to Britain's energy needs lies in the gas they hold.

For the cynical, Mr Eggar's enthusiasm could also be seen as an attempt to deflect criticism of the changes in the petroleum revenue tax announced in the Budget. The cut in PRT will encourage more intensive development of existing fields, but the abolition of tax relief for exploration will hit drilling activity and undermine long-term production. Mr Eggar seemed to be making the best of what is still a bad job for the industry.