Brexit increases North Sea field shutdowns
19th July 2016 | Rural Energy
The uncertainty caused by the Brexit vote is impacting further on the North Sea, increasing shutdowns in oil-fields.
According to consulting firm Wood Mackenzie Ltd, about 30% of oil fields in the North Sea operating at a loss, as it is one of the world’s highest cost regions. And the fact that the price of oil has fallen to less than $50 has exacerbated this problem. This was pushing more producers to plug their wells even before the UK decided to leave the European Union.
According to Oil & Gas UK, an industry group, projected spending on decommissioning in the British sector in the decade to 2024 has risen to £16.9 billion ($22.4 billion), which is 16% higher than a 10 year forecast in 2014.
Almost a third of operating platforms in the UK are more than 30 years old, longer than their design life: $100 a barrel oil justified technological upgrades to keep them running, but that is changing. Oil production peaked in the region at 2.9 million in 1999, but last year it was 60%+ lower in 2015.
Royal Dutch Shell, one of the largest North Sea operators, is shutting the Brent field, operational since the 1970s, and helps set the global benchmark. Shell is producing from just one of the four Brent platforms.
Although oil prices have risen from their 12 year low earlier this year, the UK’s Brexit vote has clouded the investment climate: uncertainty will impact investment levels and lower investment could bring forward decommissioning for some fields. And the Brexit vote will further undermine confidence in an industry which has been propped up by government tax cuts in recent years.
Oil and gas producers in the region will spend 40% less this year than in 2014 and by the end of the year an estimated 120,000 jobs will have been lost because of the downturn, Oil & Gas UK said in a report last month.
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