There will be significant knock-on effects for the oil and gas business on the UK continental shelf (UKCS) if problems in financial markets persist, an industry expert said today.
A new study by Professor Alex Kemp and Linda Stephen, of Aberdeen University, highlights long-term prospects for activity levels in British waters under different oil and gas price scenarios and costs of capital.
The results show activity levels are very sensitive to both variations in oil and gas prices and the costs of obtaining loan and equity capital.
Depending on a variety of circumstances, the number of fields and projects that could be developed from 2008-35 may vary between 85 to more than 600.
Total production in this period could also vary between 9billion barrels of oil equivalent to nearly 20billion.
Prof Kemp said that an oil price of $80 upwards could lead to maximum output.
He also said that, if lower oil prices continued, then the UK Government should rethink its level of taxation on producers, adding: “If the current problems in financial markets persist, there will be significant knock-on effects for the UKCS.”
The study says: “It should be stressed that the longer-term levels of activity depend on the infrastructure of main pipelines, terminals and key processing platforms remaining substantially intact.
“This is not guaranteed and substantial refurbishment is likely to be required to keep some of it in sound condition. The activity levels postulated also depend on the success of the various Pilot initiatives, namely the infrastructure code of practice, the fallow block/field initiative, and the stewardship initiative.”
The risk to the UK from falling oil production in coming years is greater than the threat posed by terrorism, it was claimed yesterday.
A report from the Peak Oil group said that the problem of declining availability of oil would hit the UK earlier than generally expected – possibly within five years – as producer countries started to scale down the pumping of dwindling supplies.
Peak Oil chairman Jeremy Leggett, executive chairman of alternative-energy company Solarcentury, said it was not too late for politicians to make the decisions to protect the UK from the impact of reduced oil availability.
Malcolm Webb, chief executive of industry body Oil and Gas UK, said: “We have been highlighting for some time the need for a Government boost to UK oil and gas investment . . . to abate the current decline curve for UK production, but for the Peak Oil lobbyists to suggest that the risk to the UK of this is akin to the threat from international terrorism does nothing to encourage a rational debate on securing the UK’s energy needs.
“We have long recognised the importance of moving towards a sustainable energy future with increased energy efficiency and reduced use of fossil fuels, however, it is also very clear that oil and gas will continue to play a central role in meeting energy needs for some decades to come and the UK indigenous production has a vital part to play in this.”
Mr Webb added that to seemingly suggest that the world would run out of oil and gas within five years was ridiculous.
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