Fears for North Sea output grow

Oil and gas production in the North Sea is now expected to be about 10 per cent lower over the next few years than previously thought, according to the leading survey of the state of the industry.

The faster than expected decline in production is bad news for Britain’s energy security, increasing the country’s dependence on imported oil and gas, and also for the exchequer.

The latest annual survey from the UK Offshore Operators’ Association, the trade body which gives the most authoritative assessment of the health of the North Sea, also shows a steep increase in costs and an expected decline in investment over the next couple of years.
Malcolm Webb, the association’s chief executive, said: “There are signs of a struggle for competitiveness here: issues that the industry and the government need to address, and without too much delay.”

High prices for oil and gas have led to a surge of interest in exploring the North Sea: most of it from smaller companies.

At the beginning of the month Alistair Darling, the trade and industry secretary, declared that 2006 was the best year for new finds of oil and gas for five years. There is still an estimated 16bn-25bn barrels of oil equivalent in oil and gas left to be extracted.

But old wells that are running dry and new wells that are generally very small cast a shadow over the outlook for the North Sea.

Financial Times