Unless crude oil prices rise to around $70-barrel, investment in North Sea oil and gas exploration will dry up by 2025.
In a week of appalling news for the industry as a whole, this was another stark warning from market intelligence firm Wood Mackenzie at a gloomy Oil and Gas UK annual conference in Aberdeen.
Analyst Stephen Halliday said that ‘costlier sources’ of oil supply are required over the next decade and that a price of $70-barrel for benchmark N. Sea Brent crude is need to ‘spur investment’.
Since the oil price drop, UK 2016-17 capex forecast has been slashed by $4.6 billion (20%), with global spend falling $370 billion (30%) – but the UK is attracting a lower share of investment than ever.
And Halliday published a chart showing that new investment in North Sea oil and gas is set to dive off a cliff between now – to zero – in 2025.
He explained; “Poor exploration and the oil price drop have combined to decimate the project pipeline. Crucially, costs are coming down – but more is required.”
He added that standardisation, collaboration and optimisation ‘are vital’ and highlighted the potential for the N. Sea contractor and supply-chain to exploit a multi-million pound potential market in domestic and foreign decommissioning as a possible silver lining in the cloud currently hovering over the industry.
In Malaysia – which faces the same problems as the N. Sea over the crude price oil slump – an industry-wide collaboration to reduce costs has already delivered $600 million in savings, said Bacho Pilong, Senior General Manager of Petronas, the state oil company.
Meanwhile, Grampian chamber of commerce and the British-Iranian chamber of commerce are to launch an oil and gas trade mission to Tehran later this year to stimulate N. Sea export sales.
According to the BP Statistical Review of World Energy, Iran has proven oil reserves of 158 billion barrels, equivalent to more than 150 years of production at the rate of extraction.
The investment priorities in the Iranian oil and gas industry include enhanced oil recovery projects and the construction of liquefied natural gas (LNG) export facilities.