Oil & Gas Trade Body Raises Alarm Over Accelerating Pace of North Sea Decommissioning

February 24, 2016

Oil & Gas UK, the trade body representing the interests of offshore energy producers throughout the country, has raised serious concerns about ominous trends within its industry.

Of particular concern for the organisation is the pace at which fields producing oil and gas off the coasts of Scotland are being decommissioned.

According to the trade body, the rate of decommissioning in the North Sea is accelerating at a worrying rate and estimates on the number of fields there that will cease production between 2015 and 2020 have risen by 20 per cent over the past 12 months.

Furthermore, a new in-depth report from Oil & Gas UK has shown that while significant efficiency gains have been made in the energy sector in recent years, “exploration remains at an all-time low with no signs of improving”.

The most obvious source of pressure on the oil and gas industry, which is a major employer in many parts of Scotland, is the falling price of oil worldwide.

In the context of oil and gas production from the UK Continental Shelf (UKCS), the fall of oil prices to $30 per barrel has been devastating and many companies have been forced to cease their operations entirely as a direct result in recent quarters.

Oil & Gas UK estimates that if oil prices remain at $30 per barrel throughout the rest of 2016 then around 43 per cent of all the UKCS oil fields are likely to be operating at a loss.

“The basin has to compete fiercely in the global market to attract price-constrained capital to the UK.  A coherent approach by the industry, regulator and government will be critical to boost the industry’s competitiveness and its investors’ confidence,” said Deirdre Michie, the trade group’s chief executive in a statement.

“We have a huge task ahead but the prize is worth fighting for,” she said.

“The UKCS still holds up to 20 billion boe [barrels of oil equivalent] which can continue to provide a secure supply of energy for the country, support hundreds of thousands of jobs, generate several billion pounds in corporate and payroll taxes from the supply chain and stimulate countless technological innovations.”

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