“Peak oil” decriers must be used to feeling foolish at this point, but their folly continues (and will continue) to be exposed by discoveries of new oil supplies. The latest example comes to us courtesy of the North Sea waters off the shore of the UK’s Shetland islands, where the oil exploration firm Hurricane Energy claims to have found the country’s biggest new offshore reserve of extractable oil in more than a dozen years. The FT reports:
The latest find adds to a series of successful wells drilled by Hurricane in a geological formation that analysts say looks likely to be the biggest new oil discovery beneath UK waters this century. […]
Hurricane is expected to announce that initial data from its Halifax well indicates the presence of a 1km-deep oil column and that, crucially, it appears to be part of “a single large hydrocarbon accumulation” connected to the company’s adjacent Lancaster field. […]
Before drilling began in January, Ashley Kelty, analyst at Cenkos Securities, described Halifax as arguably the most important well drilled in UK waters this century. He predicted that, if a link with Lancaster was found, the area could hold over 1bn barrels of oil.
Many more wells will need to be drilled before we can get a reliably accurate estimate of how much oil Hurricane has discovered, but this is a very good start and comes as something of a lifeline for Britain’s offshore oil industry. North Sea oil supplies made the UK a net exporter of crude in the 1980s, but since then the region’s output has fallen considerably as fields have matured and new discoveries have failed to make up that difference. The collapse in crude prices over the past two years was especially hard on the industry, whose operating costs are among the highest in the world.
In the face of all of this, the UK has been using every tool in its possession to cajole investors to continue to scour its waters for reserves like the one Hurricane just found. And while the road ahead doesn’t exactly look promising, there is at least one reason for Brits to be hopeful: North Sea operating costs have fallen 45 percent in recent years. If that trend continues and exploration keeps yielding valuable new discoveries like this latest one, there might yet be life for Britain’s offshore oil and gas industry.
There’s another wrinkle to this story, though. Scottish voters chose not to become independent from the UK in 2014 in part because of concern over how the country’s economy would do on its own. A North Sea oil and gas industry in decline affected that calculus, but an uptick in activity there could make the idea of independence more attractive to Scots. In other words, few people will be more excited about this news than Nicola Sturgeon.
[This post has been updated.]