Oil production in the North Sea has been falling sharply over the last decade but some in the industry had high hopes for the future due to the high level of investment seen in the region in the past couple of years. Wood Mackenzie, the energy consultancy firm, has released a new report claiming that this investment will likely fall by 2015, thereby dashing hopes of any resurgence in oil production.
Since 2000 the oil and gas output from the British part of the North Sea has fallen by over 60%, with particularly sharp drops in 2011 (of 18 percent fall in production) and 2013 (a 14.5 percent fall in production). It was believed that increasing investment would encourage more exploration, and bring new life to the UK’s oil industry. Last year the North Sea received its highest level of capital investment since the mid 1970’s when the current fields were in their prime.
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Combined investment in the North Sea for 2013 and 2014 has been forecast to reach around £21.3 billion ($35.1 billion).
Lindsay Wexelstein, the head of UK upstream research at Wood Mackenzie, explained that “due to poor exploration performance in recent years, capital investment is unlikely to be sustained at the current high levels beyond 2015.”
The UK economy has been suffering and the fall in revenues coming from the North Sea fields has exacerbated the situation. The government has hoped that it could encourage a new era of exploration, but rising costs and the lack of discoveries has begun to scare many larger companies away.
The junior companies in the North Sea have struggled to acquire finance to carry out exploration projects, and larger explorers have begun pulling out. The latest company to retreat was Chevron in November, who suggested they might cancel their $10 billion North Sea Rosebank project as it is not economically feasible.
By. Joao Peixe of Oilprice.com
Joao is a writer for Oilprice.com