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North Sea faces record fall in oil and gas production
North Sea oil and gas production could decline by as much as 22pc this year - the biggest annual slump on record – as maintenance on ageing infrastructure hits operations, the industry body has warned.
Oil & Gas UK abandoned earlier forecasts of a "marginal" decline in production. Photo: Alamy
By Emily Gosden, Energy Correspondent
6:00AM BST 21 Aug 2013
Oil & Gas UK said it now expected average output to fall to between 1.2m and 1.4m barrels of oil and gas per day (boepd) this year, down from 1.54m boepd in 2012.
Malcolm Webb, Oil & Gas UK chief executive, warned of a “worrying decline” in the amount of time existing oil and gas fields spent producing, despite hailing record levels of investment, at £13.5bn this year.
The group abandoned its earlier forecast, set in February, which had predicted that production would see only a “marginal” decline, of as little as 2.5pc, to between 1.45m and 1.5m boepd in 2013.
The figures highlight the challenge facing the industry in extracting the remaining potential from the North Sea. In 2003, production stood at almost 4m boepd, but has fallen every year since.
Natural decline as reserves in older fields are used up is being exacerbated by increasing time lost to unintended shutdowns for maintenance or following accidents, such as the major gas leak at Total’s Elgin field last year.
However, Oil & Gas UK predict that the declining North Sea trend could see some temporary reversal. It forecasts that new investment could drive output close to 2m boepd by 2017 - but only if the problems of high levels of maintenance shutdowns are overcome.
It expects average production efficiency - the ratio of actual production to the maximum potential of the fields - to have fallen to 60pc in 2012, down from about 80pc eight years ago. That decline represented a loss of almost 500m boepd in 2012.
“The recent decline has resulted from deteriorating reliability, with extended maintenance shutdowns, compounded by several major production outages,” it said.
Mr Webb said the industry was working with the Department of Energy and Climate Change to “tackle this serious concern through a joint task group”.
DECC has also commissioned Sir Ian Wood, former chairman of oil services company Wood Group, to examine how to maximise recovery.
The declining production leaves Britain ever more dependent on imports of oil and gas, and is one of the reasons ministers are so keen to test the potential of onshore oil and gas reserves such as shale gas.
Oil and gas output is also a key contributor to wider economic data, with a slump in North Sea production blamed for a fall in GDP in the fourth quarter of last year.
Oil & Gas UK predicts capital investment will hit £13.5bn in 2013, exceeding a previous forecast of £13bn, and up from £11.4bn in 2012. The North Sea had “not previously seen capital investment above £7bn since the early 1990s,” it said.
Greg Barker, the energy minister, said the investment showed the industry was “in excellent health”.
Oil & Gas UK identified a series of spurs for the investment including “renewed confidence among the major companies”, the impact of tax breaks and the development of new, more expensive techniques for extracting oil and gas from technically-challenging fields.Companies were also expected to spend £1bn on improving the “asset integrity” as they became more “risk averse” since BP’s Macondo disaster in the Gulf of Mexico in 2010.
North Sea oil and gas production could decline by as much as 22pc this year - the biggest annual slump on record – as maintenance on ageing infrastructure hits operations, the industry body has warned.
Oil & Gas UK abandoned earlier forecasts of a "marginal" decline in production. Photo: AlamyBy Emily Gosden, Energy Correspondent
6:00AM BST 21 Aug 2013
Oil & Gas UK said it now expected average output to fall to between 1.2m and 1.4m barrels of oil and gas per day (boepd) this year, down from 1.54m boepd in 2012.
Malcolm Webb, Oil & Gas UK chief executive, warned of a “worrying decline” in the amount of time existing oil and gas fields spent producing, despite hailing record levels of investment, at £13.5bn this year.
The group abandoned its earlier forecast, set in February, which had predicted that production would see only a “marginal” decline, of as little as 2.5pc, to between 1.45m and 1.5m boepd in 2013.
The figures highlight the challenge facing the industry in extracting the remaining potential from the North Sea. In 2003, production stood at almost 4m boepd, but has fallen every year since.
Natural decline as reserves in older fields are used up is being exacerbated by increasing time lost to unintended shutdowns for maintenance or following accidents, such as the major gas leak at Total’s Elgin field last year.
However, Oil & Gas UK predict that the declining North Sea trend could see some temporary reversal. It forecasts that new investment could drive output close to 2m boepd by 2017 - but only if the problems of high levels of maintenance shutdowns are overcome.
It expects average production efficiency - the ratio of actual production to the maximum potential of the fields - to have fallen to 60pc in 2012, down from about 80pc eight years ago. That decline represented a loss of almost 500m boepd in 2012.
“The recent decline has resulted from deteriorating reliability, with extended maintenance shutdowns, compounded by several major production outages,” it said.
Mr Webb said the industry was working with the Department of Energy and Climate Change to “tackle this serious concern through a joint task group”.
DECC has also commissioned Sir Ian Wood, former chairman of oil services company Wood Group, to examine how to maximise recovery.
The declining production leaves Britain ever more dependent on imports of oil and gas, and is one of the reasons ministers are so keen to test the potential of onshore oil and gas reserves such as shale gas.
Oil and gas output is also a key contributor to wider economic data, with a slump in North Sea production blamed for a fall in GDP in the fourth quarter of last year.
Oil & Gas UK predicts capital investment will hit £13.5bn in 2013, exceeding a previous forecast of £13bn, and up from £11.4bn in 2012. The North Sea had “not previously seen capital investment above £7bn since the early 1990s,” it said.
Greg Barker, the energy minister, said the investment showed the industry was “in excellent health”.
Oil & Gas UK identified a series of spurs for the investment including “renewed confidence among the major companies”, the impact of tax breaks and the development of new, more expensive techniques for extracting oil and gas from technically-challenging fields.Companies were also expected to spend £1bn on improving the “asset integrity” as they became more “risk averse” since BP’s Macondo disaster in the Gulf of Mexico in 2010.
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