Drilling activity in UK waters fell by more than one-third last year, according to a report published today.
Deloitte said oil and gas firms completed just 49 wells on the UK continental shelf (UKCS) in 2011 compared with 74 the previous year, despite a consistently high oil price. The professional service firm put the decline – which meant activity was at its lowest since 2003 – down to the delayed effects of the onset of the recession and current economic conditions.
Graham Sadler, managing director of Deloitte’s petroleum service group, said the UK Government’s £10billion tax raid on oil production last year would only have had a limited impact in 2011, but said it had damaged business confidence and added that the full effects of the levy rise might not be felt until the end of this year. “The low activity on the UKCS is not what we would normally expect in a year when the average monthly Brent oil price has remained well above $100 per barrel, however, the downward trend is the result of a number of factors rather than any one single issue.”
Deloitte said deal activity in the UK was strong in 2011, however, adding that out of the 118 deals recorded across north-west Europe last year half were in the UKCS.
The UK figure included 38 farm-in agreements, where one company acquires an interest from an existing licensee. Graham Hollis, energy partner at Deloitte in Aberdeen, said: “The recent high levels of farm-in activity most likely indicates that a number of financially stressed companies were seeking partners to mitigate financial risk and meet their work commitments.”
BP predicted yesterday that oil would be the slowest growing fuel by demand in the next 20 years.