Mark Andrews, UK Head of Oil & Gas at KPMG comments in response to Oil & Gas UK Economic Report on the rise in production in the North Sea.
Mark Andrews, UK Head of Oil & Gas at KPMG comments in response to Oil & Gas UK Economic Report on the rise in production in the North Sea:
“Oil & Gas experts from across the world are gathered in Aberdeen this week and we must use this opportunity to showcase the significant investment opportunities that still exist for the North Sea.
“News that production volume has increased by 16 per cent in the North Sea between 2014 and 2016 is welcomed, especially given production volume had consistently declined since 2000. With nine new fields commencing production in 2016 and total production volumes reaching 630 million barrels of oil equivalent in 2016, the highest since 2011, the future is bright. Increased production levels will help to reassure investors that there is still plenty of reserves that can be recovered economically, particularly given operating costs are now 50 per cent lower than 2014, making the basin much more attractive in a global market.
“The challenge will be maintaining this production momentum, given the significant time lag between investment decisions and the start of production. The prevailing low oil price has put the brakes on new investment in recent years, and so another fall in production volume is likely in the next few years while we wait for future investment decisions to flow through to production. It is therefore critical that the industry continues to invest in new operating models and technologies to drive production efficiency and ensure we are maximising the recovery from existing producing assets. There are already reassuring signs this is happening with UK Continental Shelf production efficiency rising to 73 per cent in 2016 from a low of 60 per cent in 2012.
“Looking ahead, there is likely to be more deal activity in the basin as the larger players look to rationalise and consolidate, opening up opportunities for new entrants to enter the basin and innovate. With interest from other sectors, such as technology, also growing as they look to transpose successful ways of working and products to the Oil & Gas sector, it’s all to play for.”
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