by Angelina Rascouet at Bloomberg
Investment in U.K. North Sea oil and gas projects could drop as much as 80 percent by 2017 as the collapse in crude prices forces the industry to cut back.
Capital investment across the industry of 14.8 billion pounds ($22.8 billion) last year will probably decline by 2 billion to 4 billion pounds annually to 2017, Oil Gas U.K., an industry lobby group, said in its annual economic report Wednesday.
“This great industry of ours is facing very challenging times,”Deirdre Michie, Oil Gas U.K.’s chief executive officer, said in a statement. “Exploration for new resources has fallen to its lowest level since the 1970s” and few new projects are gaining approval from “hard-pressed” companies, she said.
The decline in crude prices of more than 50 percent over the past year has forced the oil industry to review projects and reduce operating costs. The U.K. North Sea is one of the world’s most expensive areas to operate and resources that were first tapped in the 1960s are depleted. Employment supported by the industry has shrunk by 15 percent since last year and the lobby group predicts more reductions.
“Last year, more was spent than was earned from production, a situation which has been exacerbated by the continued fall in commodity prices,” Michie said. “A continued low oil price will inevitably cause companies to reflect on the long-term viability of their assets.”
About 140 fields will stop producing over the next five years as low oil prices accelerate decommissioning efforts in the region, Wood Mackenzie Ltd. said in a report. Five fields have already been retired earlier than expected this year and not even a rebound of prices to $85 a barrel would prevent further closures, it said.
The Edinburgh-based energy consultant expects 38 new fields will come online over the same period and