Due to the pandemic-driven collapse in oil prices, capital investment in the UK North Sea plunged by one-third in 2020 to the lowest level since 1973, offshore industry body OGUK said in its Economic Report 2021 published on Wednesday.
As a result of COVID, reduced global oil demand, reduced capital budgets, and lower project timeline visibility, capital investment in the UK Continental Shelf fell to just US$5 billion (£3.7 billion) last year, compared to US$7.6 billion (£5.5 billion) in 2019, OGUK said.
The one-third annual decline in investment was steeper than the fall in capex globally, which Rystad Energy estimates to have dropped by 27 percent in 2020.
The fall in UKCS investments was also greater than the overall UK business investment, which fell by 17 percent compared to pre-COVID times, OGUK said.
As much as US$29 billion (£21 billion) could be invested in the UK North Sea between 2021 and 2025, but less than one-third of this sum has been fully committed by producers so far.
"In a no-further-investment case, total capital could fall to less than £1 billion per year by the middle of the decade," OGUK's report noted.
Low investment levels would raise UK's reliance on imports, damaging the economy and reducing energy security, the association said.
OGUK insists that investment in the UK North Sea is essential not only for energy security reasons but also because it would ensure a managed energy transition as it would keep a highly skilled energy workforce.
"The UK faces a stark energy choice: Invest in its offshore industry to build energy security, jobs, and a managed green transition - or rely on other countries for its energy needs," OGUK said.
At the same time, activists push the UK government not to approve new oil developments in the North Sea. Greenpeace UK sued the government on Wednesday for granting a new drilling license in the North Sea.
"BP's Vorlich oil field and the Cambo oil field cannot go ahead when we are at code red for humanity," Greenpeace said, adding that "More oil fields = more climate destruction."
By Tsvetana Paraskova for Oilprice.com
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