Production of UKCS Oil and Gas Up But Prospects Still Grave
Despite a difficult year for the industry, UK Continental Shelf oil and gas production rose in the period of July to September 2015, statistics from the Department of Energy and Climate Change (DECC) show.
In its Energy Trends and Prices report released on Thursday, the DECC said that indigenous energy production rose by a record 14.2%, a figure that was contributed massively to by increased UK Continental Shelf production. Oil production increased by 32% in the three-month period of July to September on the Shelf while gas production increased by 10%.
The growth is the biggest growth since energy production peaked in 2002, the DECC says. However, the production figure is still down on 2012 levels.
The news of the growth is likely to be of small comfort to the struggling UKCS oil and gas industry, which is still facing some bleak prospects.
On Wednesday, the Office for Budget Responsibility (OBR) released a devastating forecast for North Sea oil and gas revenues. Partly due to falling oil prices, the OBR said it had revised its previous oil and gas forecasts downward.
"Our forecast for UK oil and gas revenues is just £130 million in 2015-16, down from £2.2 billion in 2014-15 and receipts of just under £11 billion four years earlier," said in its Economic and Fiscal Outlook report. "Receipts of petroleum revenue tax (PRT) in the first seven months of 2015-16 were minus £222 million."
On the same day, the UK Treasury released its Spending Review. The North Sea oil and gas industry was not mentioned in that review.
In his Autumn Statement on Wednesday, which is an annual speech to Parliament based on the Spending Review, Chancellor George Osborne mentioned energy briefly, with the focus of government support going to unconventional gas and renewable energy.
"Investing in the long term economic infrastructure of our country is a goal of this Spending Review, and there is no more important infrastructure than energy. So we’re doubling our spending on energy research with a major commitment to small modular nuclear reactors," he said.
"We’re also supporting the creation of the shale gas industry by ensuring that communities benefit from a Shale Wealth Fund, which could be worth up to £1 billion." He added, "Support for low-carbon electricity and renewables will more than double."
The omission of the North Sea sector is likely to inflame the already strained tensions between the North Sea oil and gas industry, which has seen massive lay-offs in the past year, and the UK government.
On Wednesday, the Aberdeen & Grampian Chamber of Commerce released results of a survey revealing that both confidence and activity levels on the UK Continental Shelf were at an all-time low.
"The findings, from the 23rd Oil and Gas Survey, conducted by Aberdeen & Grampian Chamber of Commerce in partnership with the Fraser of Allander Institute and sponsored by law firm Bond Dickinson, reveal the lowest level of firms working at or above optimum levels in the UK Continental Shelf since the survey began in 2004," the Chamber said in a press release.
Delays and project cancellations were highlighted as particular issues. Of the North Sea firms survey, 80% said they were seeing an abnormal increase in the number of projects being cancelled. Additionally, 76% reported they were seeing an unusual increase in the time taken to make procurement decisions.
A majority of contractors (79%) reported that they were less confident about their prospects in the North Sea than just a year ago; only 1% reported being more confident.