The North Sea Oil Recovery Is Dead In The Water
The oil majors issued a vote of confidence for the North Sea in recent days, citing precipitous declines in the cost of production, which they say will revive the region’s oil and gas production.
At an oil industry conference in the North Sea’s oil capital, Aberdeen, the chief executives of BP and Royal Dutch Shell both offered bullish assessments for the turnaround underway off the coast of Scotland. BP’s Bob Dudley said the North Sea is “back to growth,” according to the FT.
The North Sea has long been a costly place to produce oil. And as the aging oilfields in the North Sea suffer from declining output – a decline underway since the late 1990s – investing in a high-cost basin for the oil majors has slipped down on the priority list, especially when shale has emerged as an alternative in an uncertain market.
Even when oil prices were high, production was falling. When prices started to crash in 2014, the North Sea looked like a dead man walking.
But things are looking a little better than they were a few years ago. The oil majors say they have overhauled their cost structures in the region, making production profitable in today’s $50 market, even when the region struggled to be profitable with a $100 oil price a few years back. BP says costs of halved to just $15 per barrel.
Shell’s CEO Ben van Beurden told the FT on the sidelines of the conference that the industry managed to avoid the “death spiral” that they were facing in 2014. At the time, a growing number of key pieces of infrastructure looked like they might have to shut down.
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