The leading representative body for the UK’s offshore industry will
today warn the sector is at a crossroads as it publishes its
Economic Report 2018.
Oil & Gas UK
highlighted findings which show an improved landscape for
the sector, with reduced costs, competitive fiscal
terms, improved operational performance and more stable
oil and gas prices.
However, Oil &
Gas UK Chief Executive Deirdre Michie today warned about the
impact of record low drilling activity and a potentially damaging
supply chain squeeze.
Speaking to an audience of industry leaders today, Deirdre
Michie said the Economic Report 2018 shows investment conditions
remain key to the long-term future of the North Sea.
It comes as the
report shows:
-
Operating costs
have halved and are now being sustained at around
$15/boe
-
Production is on
track to be 20 percent higher than 2014
-
More major new
projects have been sanctioned by Exploration and Production
(E&P) companies so far this year than the last 2 years
combined
However,
this recovery is yet to be felt across the whole of the
sector, with the report noting:
-
Four exploration
wells were spudded in the first eight months of the year
– and even with more wells to come, total exploration
activity this year expected to be the lowest since
1965. The capacity of the supply chain has been reduced in
recent years, as revenues and margins continue to be
squeezed.
-
By 2021 there
could be capacity constraints emerging across the supply
chain, as a result of the reductions in recent years
and an expected increase in new development activity at
home and abroad. The constraints are expected to be felt
most across drilling and wells services and within engineering
and subsea sectors.
Speaking ahead of a
report launch to industry leaders in Aberdeen and London today,
Oil & Gas UK Chief Executive Deirdre Michie
said:
“Industry is
emerging from one of the most testing downturns in its history.
However, the steps that have been taken by industry, government
and the regulator have delivered tangible
results.
“Despite the
improvements seen in recent years, we find ourselves at
a crossroads. Record low drilling activity, coupled
with the supply chain squeeze,
threaten industry’s ability
to effectively service an increase in
activity and maximise economic recovery.
“The UK Continental
Shelf is a more attractive investment proposition – our
challenge now is to take advantage of this.
“We have
to drive an increase in activity while
continuing to find and implement even
more efficient ways of working which support the health
of supply chain companies whilst also keeping costs under
control.
“It shows that
investment conditions remain key to the long-term future of the
North Sea industry.
“Choosing the
correct direction of travel is critical to securing our ambition
for the future, outlined in Vision 2035. The sector deal is a
further important step in delivering this vision.
“Essential for
security of energy supply, supporting hundreds of thousands of
skilled jobs and contributing billions to the economy, this is a
vital industry. As our Economic Report shows, with the
right stewardship across the industry, it
will continue to play a leading role for many decades to
come.”
Ends
