North Sea activity falls but outlook still strong

Graeme Sheils, energy partner at Deloitte in Aberdeen, said the prospects for the region were strong. Picture: Getty

Graeme Sheils, energy partner at Deloitte in Aberdeen, said the prospects for the region were strong. Picture: Getty

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North Sea drilling activity eased during the third quarter of 2013 after an encouraging second quarter but the outlook remains positive, the latest Deloitte report into the sector reveals today.

A total of 11 exploration and appraisal wells were drilled on the UK Continental Shelf (UKCS) during the third quarter of 2013 – five fewer than during the second quarter and six fewer than the same period last year.

Despite the fall in figures for the UKCS, the Norwegian Continental Shelf (NCS) has produced eight more wells during the third quarter than the same period last year.

Graham Sadler, managing director of Deloitte’s petroleum services group said a number of factors may have affected the UK drilling figures over the summer, which is often a peak period for drilling.

“Many companies have commitments to drill wells from recent licensing rounds which are yet to be fulfilled, so we may well see these materialise in the coming months, drawing a more positive conclusion to the end of the year,” he pointed out.

However, while UK offshore slowed, deal activity saw an upturn. During the third quarter there were 14 deals reported, two more than during the same period in 2012.

Farm-in agreements, where one company takes a stake in another’s field, often to assist with drilling or development costs, accounted for more than half of UK deals.

Graeme Sheils, energy partner at Deloitte in Aberdeen, said the prospects for the region were strong.

He said: “While the most recent drilling figures are lower than expected, one quarter does not tell the whole story. Business confidence continues to be positive around the outlook for UKCS, with the oil service sector seeing high activity levels on the back of strong production.”

Smaller explorer companies have continued to show interest and enter the North Sea, which he said in part explained the prominence of the farm-in deals the region has seen recently.

Sheils added: “These players, as well as others, have a vast number of considerations when planning drilling programmes and there is no doubt that these have altered as a result of the maturity of the UKCS and accessibility to finance.

“The North Sea remains a focus for investment and we do not expect this to change in the very near future.”

The most active companies in terms of acquisitions during the third quarter of 2013 were Spike Exploration, which is currently bidding to acquire Aberdeen-based Bridge Energy, Hansa Hydrocarbons and the Kuwait Foreign Petroleum Exploration Company.

Ithaca Energy and Premier Oil were among the most active companies in terms of divesting or farming down assets. Across north west Europe, 26 deals were announced during the third quarter of 2013, one fewer that last year.

During the quarter, only one field came onstream in the UK.

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