North Sea oil and gas production is expected to bounce back in the next few years following high investment in offshore developments, an industry expert said last night.
After years of falling output, oil and gas extracted from UK fields is predicted to increase from 1.8million barrels a day this year to 2.4million a day by 2017 or 2018. There are also expected to be some 300 fields on stream in 2020; about the same number as today.
The figures follow a 19% fall in production last year, largely blamed on field maintenance and shutdowns, and a long-term trend of an annual drop of about 6%.
Alex Kemp, Aberdeen University’s professor of petroleum economics, gave a preview of the new study when he spoke to a meeting of the Aberdeen and Highlands and Islands branch of the Energy Institute in the Granite City last night.
The report, by Prof Kemp and colleague Linda Stephen, was drawn up to see what the impact of a recent string of tax allowances for oil and gas producers could be over the next 30 years.
The UK Government introduced tax breaks for projects including small fields, investment in mature fields, deepwater fields and shallow gas fields following its £10billion tax grab in its 2011 Budget. Prof Kemp said ahead of his talk: “The new allowances have certainly moderated the effect (of the 2011 Budget) very substantially and it will make a big difference in over the medium to long term. Over the next few years, we can expect with some confidence that production will increase quite a bit. Expected production of oil, in particular, we expect to rebound quite a bit.
“The figures are quite promising to say the least. After 2017-18 there will be a decline and we cannot see that being reversed.”
However, he added: “By the end of the 30-year period (2042), production could still be significant, at 500,000 barrels of oil equivalent per day in the high case (where oil prices would be $90 a barrel).”
More than half of this is expected to be from west of Shetland, and that would be dominated by oil rather than gas, said Prof Kemp.
However, he said the North Sea was still sensitive to oil prices. According to the report, oil and gas output from the North Sea is expected to reach 17billion barrels over 30 years if oil prices stay above $90 a barrel. But that could drop to 13billion if oil fell to $70 a barrel. There was also caution for the supply chain. Current very high levels of activity meant the industry was booming, he said, with field investment at a very high level due to several very large developments. Spending on new projects is predicted to reach £11.5billion next year, as already estimated by Oil and Gas UK; up from £8.5billion last year.
Prof Kemp said: “In a few years, it will come down, but nevertheless it will remain around £8billion per year, even until 2016-17.”
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