Britain's North Sea oil production has fallen significantly behind expectations, creating another economic problem for Prime Minister Margaret Thatcher.
Technolgical difficulties, delays and accidents in drilling for oil in the harsh climate and unprecedented depths of the stormy North Sea have held production down well below official forecasts. Britain still will be taking more oil from the North Sea than it consumes, but the latest government estimates for production through the mid-1980's are 20 percent lower than those made just two years ago.
This also will reduce the government's oil tax revenues from projections that had them tripling by 1984. The thatcher government had been counting on its money to help make promised income tax cuts before a 1984 national election.
To make up for the shortfall during Britain's deep recession, Thatcher's government is imposing a supplementary tax on North Sea oil production for the next 18 months and is tightening up loopholes in existing taxes. The oil companies operating in the British sector of the North Sea are complaining that these changes will give the government as much as 90 percent of their income on each barrel of oil from their most profitable fields.
Oil company officials are warning that the heavy taxes may discourage some future North Sea exploration and production, particularly in marginal fields, and reduce government revenue in the long run. Occidental Petroleum and the British National Oil Corp. already have postponed development of two small, marginally profitable fields because of the tax changes. Shell has announced that it is seriously considering a reduction in its expensive exploration of particularly deep North Sea waters.
"I realize the importance of revenue to the government at the present time," Philip Shelbourne, chairman of the government-owned National Oil Corp., said this week, "but some moderation of their tax policy is needed to avoid killing the milch cow."
The government's primary reason for making the tax changes is to reduce its budget deficit and borrowing and keep from raising other taxes even higher, according to government and oil company officials. But it also could have the effect of a restrictive depletion policy to slow production during the coming peak years in the 1980s so that more oil will be left for the 1990s and later.
"The British sector of the North Sea will remain a major, gold star area" because of its high quality oil and proximity to major markets, said an official at British Petroleum. "But exploration may slow down for a while after a tax leap like this."
Thatcher's government had already adopted a depletion policy to stretch out the life of its North Seas reserves by controlling production during the 1980s. But except for a government order delaying the National Oil Corp.'s development of one large field for two years, it has not yet been needed.
Because of the built-in difficulties and delays of drilling in the North Sea, said one oil industry source, "the natural production profile will impose its own depletion policy." Production also has been slowed by government regulations restricting the amount of byproduct natural gas that can be burned off in North Sea oil production.
"All of us --- politicians, the oil industry, commentators alike --- have underestimated the technological challenge of the North Sea," an analyst explained at an oil industry seminar here. "As a result, there have been delays and frustrations in virtually every development project. These have been reflected in lowered production forecasts."
Britain's North Sea oil production is expected to rise this year from about 1.6 million to 1.9 million barrels a day. This will exceed British oil consumption, which has fallen to 1.6 million barrels a day.
Analysts believe this drop in consumption has been caused primarily by the Thatcher government's policy of high energy prices. The tax increases in its latest budget, for example, are raising the price of gasoline here to nearly $3.50 for an imperial gallon --- equivalent to nearly $3 for a smaller American gallon.
While Britain's oil consumption, like its population, is expected to remain stable through the mid-1980s, its North Sea oil production is now expected to increase to no more than 2.4 million barrels a day by 1984, according to the government's most recent, considerably scaled-down estimates.
This is considered by industry and government analysts to be a manageable surplus that would deplete British reserves too quickly. But it would not bring the government nearly as much revenue as expected, unless world oil prices took another sharp jump as they did in the early 1970s and again at the end of the decade.
The price of Britain's North Sea oil is fairly high because it is commercially linked to the prices of similar highgrade, lightweight oil produced by African members of the Organization of Petroleum Exporting Countries. For this reason, Britain keeps only about half its North Sea oil and exports the rest, replacing it in British refineries with cheaper, lower-grade imported oil.
Without North Sea oil, the battered --- british economy would be in even worse shape than it is now. But economists and commentators have argued over whether it is wise for the government to mix its North Sea income in with general revenue in the treasury.
Proposals for segregating some of the money in an oil revenue fund to start new high-technology industries have been revived by the newly forming Social Democratic Party. Business and union leaders, as well as critics of Thatcher's economic policies inside her own Conservative Party and Cabinet, have recently urged spending North Sea oil money on overhauling Britain's aging infrastructure of roads, railroads and telecommunications to create new business and jobs.
But Thatcher's cheif economic advisers have said they believe the money should be used first to reduce the government's budget deficit and borrowing to fight inflation and free loan money for industry, and then to cut income taxes as an incentive for individual and businesses to act on their own to revive the economy. Right now, however, the Thatcher government needs as much North Sea oil revenue as it can get just to meet the cost of the present economic crisis.