Illustration of Maersk's Culzean gasfield. Image courtesy of Maersk Group

Major drop in North Sea investments by 2017

LONDON, September 10, 2015 – Investments in North Sea developments could drop as much as 80 percent by 2017, lobby group Oil & Gas UK said in its annual economic report released on Wednesday.

Capital expenditure in the industry, while at a four-year high of £14.8 billion ($22.7 billion) in 2014, is expected to drop to £10 billion ($15.3 billion), declining between £2 billion-£4 billion per year, according to the report.

The drop in crude oil prices by about half over the past year has seen the industry slash jobs and expenditures, and the report estimates that employment has dropped 15 percent in the North Sea alone since the beginning of 2014.

Over the last 18 months, the UK’s oil and gas industry drilled 20 exploration wells, discovering recoverable reserves of about 60 million barrels of oil equivalent. “Exploration for new resources has fallen to its lowest level since the 1970s,” Oil & Gas UK CEO Deirdre Michie said in a statement.

The industry is becoming more efficient, both in response to the economic drop and changing technology. Average operational costs per barrel are projected to drop from $26 to $23 worldwide. In the North Sea, one of the most expensive places to drill in the world, operator EnQuest Plc has decreased operational costs 10 percent to $38 per barrel.

“We are now seeing companies’ commitment to improving cost and efficiency reflected in industry performance. We anticipate that by the end of 2016, companies will have reduced the cost of operating their existing assets by 22 percent,” Oil & Gas UK’s economic director Mike Tholen said in the same statement.

Four new fields came on stream in 2014, adding about 190 million barrels of oil equivalent to production. The North Sea is now producing 3 million barrels of oil equivalent per day according to Oil & Gas UK.

The Culzean oilfield in the North Sea, greenlit for Danish operator Maersk to develop, could provide up to 5 percent of the UK’s total gas needs when at full production in 2020. But until then, resources could be scarce – 140 fields will be retired over the next five years due to marginal yield. Over the same period, 38 fields will come on line and 17 projects will be approved for development.

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