Latest Activity Survey 'Paints Bleak Picture' of UK Oil, Gas Sector
Oil & Gas UK's latest Activity Survey report "paints a bleak picture" of the industry on the UK Continental Shelf, according to the organization's chief executive.
The trade body said that the report provides "striking evidence" of how rising costs, taxes and inadequate regulation have taken their toll on the UK's international competitiveness. It added that the Activity Survey 2015 "highlights the urgency" with which measures are needed to secure new investment and address the collapse in exploration, "if the UK is to maximize economic recovery of its still significant untapped resources".
Commenting on the report, Oil & Gas UK Chief Executive Malcolm Webb said:
"This year's Activity Survey paints a bleak picture but also identifies this region's potential, emphasizing the importance of government and industry now putting the right measures in place to secure its long-term future. This is crucial not only for the energy security that domestic oil and gas production provides but also for the hundreds of thousands of highly-skilled jobs, advanced technology and billions of pounds of exports which the industry underpins.
"Without sustained investment in new and existing fields, critical infrastructure will disappear, taking with it important North Sea hubs, effectively sterilizing areas of the basin and leaving oil and gas in the ground."
The survey found that 6.3 billion barrels of oil equivalent (boe) are currently sanctioned or under development, while there are another 3.7 billion boe of potential investment opportunities. However, Oil & Gas UK said that companies have indicated that at the end of 2014 less than 2 billion boe of these investment opportunities were likely to be developed.
Operating expenditure rose by almost 8 percent to GBP 9.6 billion in 2014 and on a unit of production basis, reached a record high of GBP 18.50/boe. Falling oil prices meant that revenues fell to just over GBP 24 billion for the year, the lowest since 1998, and this, combined with rising costs, resulted in a negative cash-flow of GBP 5.3 billion for the basin, the worst since the 1970s.
Cost overruns and project slippage on several large projects pushed capital investment in 2014 beyond expectations to GBP 14.8 billion, with half spent on just 12 fields. As these large projects move from the investment phase into production, Oil & Gas UK noted that there is "very little" new investment lined up to replace them and that investment was in fact expected to fall in 2015 by around one third to between GBP 9.5 and GBP 11.3 billion.
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