North Sea oil 'viable for 30 more years'

Published on Saturday 27 February 2010 15:31

THE North Sea has a viable future for the next 30 years, or beyond, provided oil heads above $200 a barrel, an industry expert has forecast.

Matt Simmons, the founder and chairman emeritus of energy investment specialist Simmons & Company International, said there was a bright future for the UK sector of the North Sea "if we come up with attractive investment opportunities".

"It's in everyone's interest to keep oil and gas infrastructure alive," he said. "But the game changes. We don't have any fabulous new fields to find, unless we get really lucky.

"Basically, we now need to mitigate the declines while we look at how we can start replacing oil. Oil prices need to go way higher though. You couldn't start to rebuild the oil and gas infrastructure at what they are today."

Oil prices hit a record peak of almost $147 a barrel in July 2008, triggering soaring prices at the petrol pumps. After falling to the low $30s less than six months later, they have since recovered to stand at about $80.

Simmons described even the near-$150 level as "dirt cheap". Asked if $200 was a more realistic price to sustain investment in oil and gas assets, the industry veteran replied: "I'm not sure that's high enough."

Founded in 1974, Simmons & Co is one of the few independent investment houses specialising in the energy industry. Over the years it has acted as financial adviser in more than $140 billion (92bn) of transactions, chiefly mergers and acquisitions.

Simmons was on a visit to the Houston firm's Aberdeen operation following the publication last week of a key report examining the future of North Sea oil and gas exploration and development.

Industry body Oil & Gas UK said the sector was standing at one of the most crucial crossroads in its history.

It forecast that the North Sea could continue to meet a minimum of 50 per cent of the UK's energy needs until at least 2020, provided the industry attracts the investment and fiscal change regime changes required to encourage development of existing and potential reserves.

However, the trade body warned that figure could plunge to just 20 per cent unless an "investment climate" for the area is sustained.

A host of smaller players have been attracted to the North Sea as the major companies scale back their operations.

Simmons noted the "unquantifiably" high costs of abandonment expenditure, adding that it was "worth it to do everything possible to keep that little bit of production going".