OGA reports positive signs on Maximising Economic Recovery in latest N. Sea annual report

Key North Sea oil and gas performance indicators point in the right directions
Key North Sea oil and gas performance indicators point in the right directions on (from left) output, new investment, operating costs (down to £12-barrel in 2017) and production efficiency.

The Oil and Gas Authority has issued its second annual update summarising the work of the Maximising Economic Recovery (MER) task forces and the MER UK Forum.

Dr. Andy Samuel, OGA chief executive, said: “These groups play an important role in helping to deliver MER UK and have made a substantial contribution to the transformation in UKCS performance, making the region more competitive as a result.”

See chart, left

Meanwhile, the rise in oil prices to around $76-barrel – partly as a result of small cuts in OPEC production – means crude is now priced at its highest since the $110-barrel spike in 2014.

But this does not mean that Big Oil giants will now rush to boost investment spending in new exploration work – at least as far as BP is concerned.

The rise in North Sea benchmark Brent crude to an average of £67-barrel boosted BP’s profits for the first three months of this year by 70% to $2.6 trillion.

But BP finance chief Brian Gilvary commented: “ We’re not going to chase higher oil prices and start looking for more projects in this environment. Our investment plans are on track and we’ll live within the $15-17 billion framework that we’ve previously set out.

“In 2018, we’re aiming to spend around $15-16 billion and, if anything, we’re trending towards the lower end of that range right now.

“We’ll see benefits from the higher oil price as that will help strengthen the balance sheet through the year; net debt and gearing will start to track down and then we’ll look at the balance between the distribution of returns to investors and further investment in the business.

“I think the oil price will remain volatile. Similar to last year, we’re seeing strong demand growth in 2018 – around 1.7 million barrels a day. We’re seeing OPEC compliance, but also compliance within the non-OPEC participating countries.

“In the second half of the year, we may see further guidance from OPEC, but I think demand will remain strong.

“But, from our perspective, at BP we plan to balance our sources and uses of cash at around $50 per barrel. The benefits of a higher price mean our balance sheet will strengthen and, ultimately, that will avail us of cash to distribute to our shareholders”

11 May 2018

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