2014 could prove a pivotal year for North Sea investment after record support for the UK continental shelf over the last 12 months, according to an leading industry review.
The last year saw the highest level of investment on the UKCS since the oil boom of the 1970s, with £13.5billion invested in the North Sea in 2013 and almost 440million barrels of oil equivalent brought onstream.
But with less exploration and mergers and acquisition activity than the previous year, plus questions over the economics of major projects including Bressay and Rosebank, energy consultancy Wood Mackenzie said a level of ‘cautious optimism’ can be displayed – and warned spending is likely to drop off in 2015.
“Although some uncertainty remains over the longevity of the sector, 2014 could prove to be a pivotal year for the UK’s North Sea,” said Wood Mackenzie’s head of UK upstream research, Lindsay Wexelstein.
“The final recommendations from the Wood Review will be delivered in early 2014 and could ultimately change how the industry is regulated.
“In addition, potentially one of the most significant events to take place next year will be the Scottish independence referendum in September, the results of which could ultimately lead to a division of oil and gas assets between Scotland and the rest of the UK.”
The company, which has published its UK upstream oil and gas review of 2013, found only 13 new fields brought onstream over the year – less than two thirds of the predictions for a year ago.
Exploration continued to slump on the shelf, with just 79million barrels yielded last year – a situation which Wexelstein warned could have a significant impact on operations in future.
“Due to poor exploration performance in recent years, capital investment is unlikely to be sustained at the current high levels beyond 2015,” she said.
“Just 52 exploration and appraisal wells were spudded last year. This is largely due to stretched company and service sector resources as well as difficulties some companies faced in raising finance to fund exploration activity.”
Despite the scaled back operations in some sectors of the industry, the report found reason to be positive for the forthcoming 12 months, particularly in the wake of the latest round of licences.
A total of 52 new licences were awarded late last year in the 27th offshore round, bringing the number of offers to 219 – with 21 being smaller independent firms. As a result, Wood Mackenzie said it expected 14 new fields to come onstream this year.
“Despite poor exploration success over the last few years, the second tranche of awards associated with the 27th UK Offshore Licensing Round in November 2013, demonstrates that companies are still interested in exploring in the UK,” she said.
“However, we expect E&A drilling activity to remain low over the near term due to the same issues experienced over recent years.”
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