North Sea Oil Industry Sail Into Turbulent Waters

The North Sea has been home to over 180 offshore rigs, with total production from the region amounting to an average of 1.7m barrels of oil equivalent (boe) per day, in 2018. While many think that the final days of the North Sea oil industry are near, a lot many feel that the grass is still greener for the North Sea. Both sides have received their fair share of support through divestment decisions by giant oil firms and climbing hydrocarbon production from the region, respectively.

In this article, we have put together interesting viewpoints, facts and figures to help you understand the current scenario of the North Sea Oil Industry.

North Sea Oil Industry for the beginners

To start with, the North Sea (often confused as a singular region with hydrocarbon reserves) is, in literal terms, humongous. It consists of five distinct segments, namely the United Kingdom Continental Shelve (UKCS), the Norwegian Continental Shelve (NCS), and the continental shelves of Denmark, the Netherlands, and Germany. Amongst these segments, the UKCS and NCS together account for more than 90% of reserves in the entire North Sea. Exploration activities in the region were triggered with the discovery of giant Gronigen gas field in the Netherlands, in the late 1950s. In the years that followed, the North Sea Oil Industry saw some major discovery in the form of Forties field on the UK Continental Shelf (UKCS) and Ekofisk on the Norwegian Continental Shelf (NCS). By 1996, overall production by the North Sea Oil Industry had trumped 6 million b/d mark. Major contemporary players in the region included BP, Shell, Chevron, Venture, BG Group and others.

Throughout the 1990s, oil firms strived and remained committed to upgrade infrastructure and bring in more investment to hold the production stable. It was not until the end of the 20th century that the ‘never-ending’ output from the North sea reserves began to slow down, settling at 6.2-6.4 million barrels per day in 2000. This was when questions on the potential of the North Sea Oil Industry to provide for a sustained supply of fuel began to trouble oil and gas firms. Today, the production from the entire North sea has dropped to around 1.7 million barrels per day. While some of the firms operating in the region are pouring more money to boost infrastructure, a lot of the firms have decided to halt their journey in the North Sea.

The list includes some big names of the industry, such as Chevron, Shell, Marathon Oil, ConocoPhillips, EOG Resources and others.

Viewpoints on North Sea production

Different experts have given different perspectives on the North Sea. These perspectives have been shaped by either the recent departures of oil majors from the region, or the rising production trend in the North Sea. In a 2019 report published by Wood Mackenzie, Kevin Swann of Good Morning Scotland comments, “Last year was a low for exploration, but there seems to be renewed appetite, renewed confidence and crucially the budget for exploration. It’s not just exploration. A lot of money – more than in 2018 – is earmarked for development and redevelopment. In terms of exploration, last year only eight exploration wells were completed. This year we expect up to 15 wells, although there could be more. These are all good signs”.

This says a lot about the future strategy of operators in the North Sea oil industry. In another statement, Eirik Waerness, Chief Economist at Statoil said, “The North Sea is here to stay and is alive and kicking – the people who will turn off the lights in the Norwegian sector haven’t even been born yet.”

These are clear indications that operators are just not ready to give up on the potential hydrocarbon reserves.

Oil and Gas Industry Outlook for the North Sea: A Scintillating Ray of Hope

Research and consulting firm, GlobalData forecasted an 8.3% growth in the crude production by the North Sea oil industry through 2018-2020. In quantifiable terms, the report predicts the production of over 3.2 billion barrels of North Sea hydrocarbon reserves from 256 oil fields between 2018-2020. While all of this is a very hopeful portrayal of the upcoming opportunities in the region, we cannot ignore the fact that oil production has fallen drastically over the years. Analysts are torn between trends of divestment led by giants like Chevron and more than 11 final investment decisions (FIDs) taken by operators last year. All this being said, it’d be interesting to observe the course of the north sea oil industry in the coming years.

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