UK oil output seen rising in next few years -study

Britain’s North Sea oil output, long in decline, is likely to increase in the next few years, according to research published on Wednesday, reflecting the impact of rising investment, high prices and tax breaks.

Oil output will reach 1.4 million barrels per day (bpd) in 2017 based on an oil price of $90 a barrel, the University of Aberdeen study predicted. Last year, production fell more than 17 percent to average 1.04 million bpd.

“Oil production should revive from recent levels for a period of several years, particularly with the higher-price scenario, where the increase could be substantial,” the study by Alexander Kemp and Linda Stephen concluded.

The finding is relatively upbeat on the near-term prospects for British output. While the industry is benefiting from a rise in investment, other experts have predicted a slowing of the rate of decline rather than an increase.

The report was published before the UK government’s Autumn Statement on the economy later on Wednesday and at a time when the North Sea is seeing something of a mini-revival. In March, the government announced tax breaks that have provided an incentive for companies to do more work in the North Sea.

An increase in output could provide a boost for a British government struggling to revive its economy.

It might also have implications for a vote on Scottish independence that is scheduled for 2014, as a majority of UK oil and gas is in Scottish territory.

MORE TAX REVENUE

A spokesperson for the Scottish government, in response to the study, said oil and gas would remain an “enormous economic resource” for decades and extracting as much as possible of the remaining supplies was key.

“Just one percent more recovered oil and gas over the lifetime of development equals 22 billion pounds ($35 billion) more tax revenue,” the spokesperson said.

UK natural gas output is also expected to rebound in the next few years, based on a gas price of 55 pence per therm as well as $90 oil, to reach over 5 billion standard cubic feet per day in 2015, the study said.

Britain was among the world’s top 10 oil producers in the 1990s, but output has declined from a peak of 2.9 million bpd in 1999, when oil prices dipped to $10 a barrel, as the larger and easier-to-tap fields have been pumped out.

Last year’s drop in oil output came despite a record average Brent crude price of $111 a barrel. This year Brent has averaged almost $112, on track to exceed last year’s all-time high.

Still, the study said total production in the next 30 years may not reach a government estimate of 20 billion barrels of oil equivalent (boe). It forecast 16.8 billion boe instead unless more work is carried out, including on exploration and project development.

While field investment is expected to reach an “extremely high” 11.5 billion pounds in 2012 due to the development of several large fields and projects, spending could take a downward turn, the study said.

“In a few years, it will fall substantially unless more new projects are brought forward,” it said.

Reuters