• 1 day PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 1 day Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 2 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 days Schlumberger Warns Of Moderating Investment In North America
  • 2 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 2 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 2 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 2 days New Video Game Targets Oil Infrastructure
  • 2 days Shell Restarts Bonny Light Exports
  • 2 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 2 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 2 days British Utility Companies Brace For Major Reforms
  • 3 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 3 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 3 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 3 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 3 days Rosneft Signs $400M Deal With Kurdistan
  • 3 days Kinder Morgan Warns About Trans Mountain Delays
  • 3 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 3 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 4 days Russia, Saudis Team Up To Boost Fracking Tech
  • 4 days Conflicting News Spurs Doubt On Aramco IPO
  • 4 days Exxon Starts Production At New Refinery In Texas
  • 4 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 5 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 5 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 5 days China To Take 5% Of Rosneft’s Output In New Deal
  • 5 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 5 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 5 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 5 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 5 days OPEC Oil Deal Compliance Falls To 86%
  • 6 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 6 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 6 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 6 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 6 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 6 days Aramco Says No Plans To Shelve IPO
Tesla Execs Bail As Cash Flow Hits Record Lows

Tesla Execs Bail As Cash Flow Hits Record Lows

Amid a rough second quarter…

Clashes In Kurdistan Send Oil Prices Higher

Clashes In Kurdistan Send Oil Prices Higher

Reports of skirmishes between Iraqi…

Michael McDonald

Michael McDonald

Michael is an assistant professor of finance and a frequent consultant to companies regarding capital structure decisions and investments. He holds a PhD in finance…

More Info

BP Not Giving Up On The North Sea Just Yet

BP Not Giving Up On The North Sea Just Yet

Crude’s continued decline is threatening to make many projects uneconomical for operators. That’s not much of a concern in the short-term given that the world is currently awash in a sea of oil. Over the longer term however, a continued weak oil price environment could lead to a drastic slowdown in exploration and as lack of future supplies. This, in turn, would lead to much higher prices several years down the road. That kind of price volatility is not good for anyone – consumers or producers.

It is reassuring then to see that at least a few players in the oil space are trying to think longer term. BP in particular comes to mind here as the firm is dramatically increasing its investment in the North Sea. The North Sea has been hit hard by plunging oil prices, relatively high costs including extraction taxes, and all of the problems associated with aging oil fields.

Related: Tianjin Disaster A Wake Up Call For Chinese Petrochemical Industry

The North Sea has seen production fall 70 percent from its peak more than a decade ago, and the British government is so concerned about the future of the field that it announced a major tax cut earlier this year for petroleum producers operating there. There has been a small uptick in production since that announcement, and some speculate that there may be a renaissance in the area. That would be good news for the industry over the long term.

The North Sea field is a reliable producer in a politically stable region of the world. That makes it an important staple in the industry. It unclear if the uptick in production is sustainable, but one key to a sustained increase is greater investment. That is where BP comes in.

Related: Oil Prices Must Rebound. Here’s Why

BP recently confirmed that it plans to invest $1 billion in a cornerstone North Sea asset. That’s a major vote of confidence in the field at a time when almost no one has any confidence in the energy industry at large. BP’s investment will add 15 years to the lifespan of its project, and will keep a key asset running well into the future. BP’s Eastern Trough Area Project (ETAP) has been a major producer for the firm for close to two decades and has produced more than 520 million barrels of oil.

The investment is even more important in that it represents a crucial vote of confidence in the future of offshore drilling. If it has been a bad year for oil, it has been a true catastrophe for offshore drilling firms. BP’s investment helps to show the market that at least one oil major still sees a long-term role for deepwater in its portfolio. Enesco and Byford will be working on improving the aging field for BP, and that should help give ESV’s investors at least a little confidence in the value of their severely beaten stock.

Related: Low Oil Prices Could Break The “Fragile Five” Producing Nations

BP’s move while significant, is really a reflection of the move by the UK to reduce taxes and stream line the governmental costs associated with the North Sea. The truth is that at times like these, governments need to show confidence in the future of the energy industry and do what they can to ease the tax and regulatory burden the industry faces. Just as stimulus packages can help the broader economy during a recession, directed stimulus in the form of reduced energy industry regulatory hurdles can help keep the industry afloat during the downturn. Britain and BP have both done their jobs in this case, and taken a small step forward towards stable production in the future regardless of how long the slump lasts.

By Michael McDonald of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment
  • mfan2 on August 21 2015 said:
    Good article; but, being an old person, I know that "several years down the road" is actually always about a decade. We will be facing a decade of low oil prices, then a decade of medium prices, then back to a decade of high prices. Except that solar power will probably upend the oil applecart, and we will never see high oil prices again. Ever.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News