The North Sea needs continued investment from businesses and government through its current period of transition, according to a new report from Deloitte.
The business advisory firm has just released its latest Petroleum Services Group’s North West Europe Review which details drilling, licensing and deal activity across the region for the whole of 2014.
The report found 40 wells were drilled offshore UK throughout the year, a decrease on the 50 wells reported in 2013.
However the company said the figure was “largely consistent” with expectations given recent trends and market conditions.
Graham Sadler, managing director of Deloitte’s Petroleum Services Group, said: ‘Over the last 12 months, both industry and government have recognised the need for change on the UKCS.
“We have started to see some positive steps taken in that direction, with the recommendations made in the Wood Review and tax changes announced in the Autumn Statement among them.
“We continue to see steady but low levels of drilling and hope this will increase. However, that will require industry dialogue with, and strong guidance from, the OGA.
“It will also need further clarity from Government over the fiscal incentives that will be made available to support exploration and appraisal activity.
“To sustain its future, the North Sea’s stakeholders will need to adapt to a lower oil price environment and reduce costs in order to get through this period of transition.”
The Deloitte report also found there was a reduction in the number of field start-ups in 2014, decreasing from 13 in 2013 to six this year.
There were fewer deals completed in the last 12 months, dropping from 63 in 2013 to 23 in 2014.
Farm-ins were the most prevalent type of deal again this year, representing 57% of transactions (13 deals).
The remaining UK offshore deals consisted of six asset acquisitions, two corporate acquisitions, and two divestitures.
With the price of oil dropping significantly, many asset prices are likely to be revised. Derek Henderson, Deloitte’s Aberdeen Office Senior Partner, said this could result in more deals being completed in 2015.
Derek said: “Last year saw a reduction in the number of deals taking place in the North Sea, despite a large number of assets being available on the market.
“Price pressure and access to finance were issues for the most likely buyers – smaller companies with limited budgets – creating a price differential in the market and stalling deal activity.
“While it is not the only consideration, it is likely that if the oil price remains low assets will become more affordable to some of the region’s more cash-rich players who may be looking to invest in the UK basin.
“As a result, we could see more transactions in 2015 as some businesses look to divest and focus on other areas.
“This could also bring about further consolidation among some of the players in the market. There
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