Crude prices have rebounded 5 percent in trading today, but that will come as cold comfort for producers struggling to find ways to stay profitable in a market seemingly on course to hold under $30 per barrel for the foreseeable future. Sluggish Chinese demand and a swelling global supply have created a massive global oil glut, and the resultant bearish market is making life very difficult for North Sea oil production, which was already facing its twilight years. The FT reports:
More than a dozen offshore oil rigs, each weighing thousands of tonnes, have been quietly parked in [Scotland’s Cromarty Firth], the highest number in more than a decade, after a plunge in crude prices that has nearly killed North Sea exploration[. . .]
“In previous oil crashes there has been a sense that it will come good again — maybe in 18 months the price will bounce back,” says Bob Buskie, chief executive of the Cromarty Firth Port Authority. “But people have lost sight of the dynamic between Saudi [Arabia] not adjusting output and America still throwing money at the fracking game. We have ended up awash with oil.”
Though North Sea production helped make the UK a net oil exporter in the 1980s and eventually a net natural gas exporter as well, today the UK is once again a net importer of fossil fuels as that offshore output has waned. North Sea oil was already among the world’s most expensive to produce, and as those fields have matured companies operating them have faced an unenviable choice: decommission offshore platforms (itself a costly endeavor) or continue to pump increasingly meager amounts of oil at lower and lower prices.
Rigs are crowding one another cheek to jowl in the Cromarty Firth, and their inactivity is a poor portent for the fate of one of the UK’s most important domestic energy resources.