The head of BRINDEX – the independent oil explorers’ association – is warning that the North Sea oil industry is ‘close to collapse’.
Rob Allan, chairman of BRINDEX – and a Director of Premier Oil – said that no new projects in the North Sea are profitable with benchark Brent crude oil selling at below $60-barrel.
He said: “It’s almost impossible to make money at these oil prices. It’s a huge crisis.
“This has happened before, and the industry adapts. But the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that’s painful for our staff, painful for companies and painful for the country.”
“In terms of new investments – there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks. Budgets for 2015 are being cut by everyone.”
As recently as August 2014, analysts were forecasting that Premier Oil – which is registered in Edinburgh – was looking to pump its first oil from its Solan field in the West Shetland basin by the end of this month.
However, Tony Durrant, Chief Executive, Premier Oil, moved quickly last night to scotch rumours to the contrary – and confirmed that the company is going ahead with planned production.
Meanwhile, Allan also added that many of the job cuts across the industry will not be publicly announced.
Founded at the beginning of North Sea development in 1974, the Association of British Independent Oil Exploration Companies seeks to promote the role played by British independent exploration and production (E&P) companies in maintaining a powerful and effective UK based oil and gas industry. (NB: The mis-spelling of ‘independent’ on their logo is the responsibility of BRINDEX)
Allan’s comments are supported by the findings of a recent survey commission by Oil and Gas UK, the London-based industry trade body; see Aberdeen to bear brunt of forecast 23,000 N. Sea job losses by 2020 – http://goo.gl/4kvEpj
An Oil and Gas UK spokesman said: “While we cannot comment on the commercial decisions, and individual opinions, of its members, the industry trade body recognises that the falling oil price is affecting activity across the North Sea and that companies are having to take hard decisions in light of this challenging business environment.”
Meanwhile, oil giant Marathon – and a North Sea operator – announced that it will chop about 20% of its investment and exploration budget for 2015.
And Apache – a major N. Sea producer – has announced a 10% cut in its contractors’ rates with effect from 31 December 2014.