First the bad news: the North Sea was the most expensive place in the world to explore for and produce oil in the world – even when crude oil was topping $100-barrel in 2014.
And on the political horizon, many North Sea operators and major supply chain companies consider British Independence from the EU Bloc – aka Brexit – poses a number of risks and want to remain in the EU so as to;
- Maintain ‘friction-less’ access to (free movement of people) labour markets
- Maintain a ‘strong voice’ for oil and gas in Brussels/ EU, and to
- Protect energy trading and the internal (EU) energy market
Now the good news: since then the North Sea has reduced virtually halved its average operating costs from around $30-barrel to around $16-barrel by 2016.
But it is still the most costly oil basin in the North Sea though the gap between the next most expensive – Brazil – is now only about $3-barrel.
These were some the ‘grounds for cautious optimism’ that Holyrood MPs on the Scots parliamentary cross party group on oil and gas were told yesterday in Edinburgh. Other positive key performance indicators (KPIs) presented in the 2017 Economic Report by Oil and Gas UK included;
Total production has climbed from 560 million barrels in 2013-14 to around 650 million barrels in 2015-16
New oil field start-ups have doubled from four in 2014 to eight in 2016
But Adam Davey, OGUK market intelligence manager, told MSPs; “When analysing where to invest capital in new exploration, oil companies consider their return on that investment – and take into considering operating costs, political risks and uncertainties and geological risks not just in one specific basin, but also between oil basins around the world.
“So while the North Sea is becoming more competitive – it still remains the most expensive basin in the world.
And a BP spokesman warned: “There are more oil prospects around the world to invest in – such as Brazil, Gulf of Mexico and West Africa – than there is funding available to support that capital expenditure.”
Major oil companies are beginning to retreat from North Sea exploration and production; 10 years ago, Big Oil giants owned about 75% of North Sea assets, but this has declined to around 50% this year, according to analysts Wood Mackenzie.
See also:
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28 Sept 2017
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