THE year ahead could prove pivotal for the UK’s North Sea industry, according to consultancy Wood Mackenzie’s annual UK upstream oil and gas review.
Analysts at the Edinburgh-based firm described 2013 as a mixed year for the industry with capital investment continuing to increase but against a backdrop of projects delays, production underperformance and poor exploration success.
But with promising new fields due onstream and an increase in UK focused deals expected in 2014 it said the year ahead could see an improvement in exploration success and production performance crucial to ensuring the longevity of the sector.
Lindsay Wexelstein, head of UK upstream research for Wood Mackenzie, said: “Last year capital investment reached the highest level in real terms since the mid-1970s. We anticipate £21.3 billion will be spent on capital investment across 2013 and 2014. However, spiralling costs did put pressure on project economics and caused some developments, such as Bressay and Rosebank, to be put on hold.”
The report says new fields brought onstream in 2013 equated to 438 million barrels of oil equivalent (mmboe) of recoverable reserves.
A similar number of fields and volume of reserves is expected onstream in 2014 but Wexelstein cautioned: “Due to poor exploration performance in recent years, capital investment is unlikely to be sustained at the current high levels beyond 2015.”
Exploration success has been low since the beginning of 2011 and according to Wood Mackenzie only 79 million barrels of oil equivalent were discovered in the UK in 2013, fuelling concerns about the longer term outlook.