Oil and gas industry efficiencies are driving a 45 per cent fall in the cost of extracting a barrel of oil or gas from the UK Continental Shelf (UKCS), a new report out today shows.
In a second boost for the North Sea oil sector, production lifted 10.4 per cent in 2015, the first increase in 15 years, says the trade body Oil & Gas UK’s Economic Report 2016.
However, the report adds that “major challenges remain, with record low exploration and a lack of capital investment” in the region.
Oil & Gas UK says the improved competitiveness demonstrates the “tenacity” of the UK offshore oil and gas sector despite difficult market conditions.
Companies have retrenched and improved efficiencies at retained projects as the North Sea has been battered by a low oil price in the past two years.
It was trading at $115 a barrel in the summer of 2014 before slumping to a low of $27 in January 2016, and is now at around $46. Today’s report comes as big oil producers are set to gather in Algiers this week at the three-day International Energy Forum, rasing hopes of a potential supply deal that could support crude prices.
Today’s report says: “The supply chain has seen an average 30 per cent fall in revenues since 2014 and ongoing job losses – some 120,000 are expected to have been lost over the past two years – are the personal cost to individuals and families across the UK”.
Deirdre Michie, Oil & Gas UK’s chief executive, said the latest evidence “demonstrates what our industry can achieve when the basin’s competitiveness is addressed and the tax regime is reformed”.
But she added that “little new investment has been approved in 2016 and 2017 looks no better”. Michie said: “In light of this I am calling on governments today to vigorously champion the UK’s oil and gas industry, by providing certainty in our fiscal regime, encouraging new entrants to the market and recognising our supply chain as vitally important to the economy.”