$35 crude is straining the budgets of every oil major and petrostate, and it’s forcing producers to take a hard look at their operations to decide what projects need to be shuttered. For North Sea producers, the problem is even worse, as many of the companies operating in that region were facing dim outlooks even when oil was fetching more than $100 per barrel. Now, as the FT reports, up to 50 North Sea fields are on the verge of closure, and for many, even a price rebound wouldn’t be enough to save them. More:
Wood Mac said oil companies were likely to halt output at 140 offshore UK fields during the next five years, even if crude rebounded from $35 to $85 a barrel. This compares with just 38 new fields that are expected to be brought on stream during the same period.
Thirty years ago, North Sea production helped remake the UK’s energy landscape in a manner similar to what fracking has done for the United States. In the 1980s, offshore production helped make the UK a net crude exporter and eventually a net exporter of natural gas as well. Today, it’s a net importer of both of those hydrocarbons as North Sea fields have matured and their productivity has declined. The industry delayed the decommissioning of many of its offshore drilling platforms, preferring to continue squeezing out increasingly meager quantities of oil and gas rather than incurring the high costs of closing up shop and bringing that equipment back onshore.
But those decommissioning delays have only put off the inevitable and set up a more dramatic decline for North Sea production—and that will still be true even if prices spike. While Russia and Venezuela and the rest of the world’s petrostates wring their hands over the global crude glut, they can perhaps take solace in this one example of a supply reduction.