Smaller Players Sustaining Europe's Maturing Offshore
Source: Penn Energy, John Westwood (8/18/09)
"Declining production and high costs have forced the original developers, the oil majors, into other regions."
During the past decade the corporate scene has changed dramatically. Declining production and high costs have forced the original developers, the oil majors, into other regions. That exodus opened the way for a new breed of smaller players better geared to economically extract the remaining reserves from small fields and squeeze the last drop out of massively depleted existing ones.
After the oil price slump and despite subsequent rises in the 1Q09, the high costs of exploring and difficulties of raising finance resulted in major activity cuts in the UK sector. Only 15 exploration wells were drilled in the three months to June 2009, 57% fewer than last year, according to Deloitte.
Oil & Gas UK, the industry body, has warned that oil and gas investment could fall dramatically, stunting the supply chain and threatening future expansion.
Douglas-Westwood expects 2009 global offshore oil and gas production to average 42.3 million b/d of oil equivalent, excluding natural gas liquids, and forecast that by 2013 it will have grown by around 26% to some 53.5 million boe/d.
Growth will occur in varying degrees in all regions, led by the Middle East at 3.5 million boe/d, Africa 2.9 million boe/d and Asia-Pacific 2.7 million boe/d. The single exception will be offshore Europe, where we expect production to decline by just under 1 million boe/d from its 2009 forecast level of 8.3 million boe/d. Of the significant European offshore producers and products only Norwegian gas is on the increase.
In the words of the House of Commons Energy and Climate Change Committee report on Offshore Oil & Gas of June 17, "the UKCS currently faces a quadruple whammy of high costs, low prices, lack of affordable credit, and a global recession. . ."
Behind the rhetoric, what is certain is that the UK is past its production peak in both oil (1999) and gas (2000)—the major fields of the 1970s are now in decline, and the newer, smaller fields that utilize modern extraction technologies are unable to offset this decline.