The North Sea oil and gas industry is entering a hangover period after years of booming business, a leading energy financier has warned.
Eddie Leigh, from Simmons & Co, claims the UK Continental Shelf (UKCS) system is in a fragile position as a result of rising production costs and a dip in exploration.
Speaking at a lunch in Aberdeen today, he warned that mounting costs were leaving the industry facing a tough landing after years of success.
“Production of the 42billion barrels from the UKCS in the last 40 years was done at an average of $20 per barrel. But current production is going to come in at something like $40 per barrel,” said Mr Leigh.
“That’s an enormous cost escalation; after three or four years of boom, there is a bit of a hangover to come.”
He said global exploration and production (E&P) capex will hit a new record of around £435billion this year – up 7% on last year.
“E&P spend has grown almost fivefold since 1999, and oil companies are having to work incredibly hard to maintain their existing production levels,” said Mr Leigh at the Aberdeen Houston gateway event yesterday.
He said despite these challenges, there was still enormous opportunities for oilfield service companies in the North Sea.
However, he warned companies faced a challenge attracting staff to Aberdeen due to high living costs and a “chronic shortage of housing and schooling”.
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