North Sea production rises, reversing years of declining output

North Sea production

North Sea production is expected to rise as companies open new fields and use technology and efficiencies to extract more oil from existing projects. Statoil photo.

New North Sea production amounts to 1.2 million b/d

North Sea production is expected to rise in the coming years as new oil projects come online, offsetting a slide in output from the world’s oldest deepwater basin.

According to a report by Reuters, the new projects stretch from the West Shetlands to the fringes of the Arctic Ocean.

In 2016, North Sea production amounted to 2.54 million barrels per day (b/d) and is expected to reach 2.59 million b/d in 2017 and increase to 2.63 million b/d in 2018, according to data from Rystad Energy.

Reuters research shows a number of projects operated by oil majors and smaller companies will be coming onstream before the end of the decade.

Statoil’s Johan Sverdrup project will start pumping 440,000 b/d in 2019, increasing to 660,000 by 2022.

These new projects along with a more efficient use of existing production is boosting North Sea output.

When oil prices fell in 2014, some North Sea producers sold off their assets while others took advantage of new technologies to extract more oil for less money.

James Davis, analyst with FGE said oil companies have revisited development plans for old fields and delayed decommissioning dates.

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New technologies and efficiencies are allowing firms to increase output beyond original expectations and save money.

Premier Oil Chief Executive Tony Durrant told Reuters “The drop in the oil price forced everyone to focus even more than they were on (production) uptime and operating efficiencies which have risen dramatically over the last two years.”

Durrant added “We’ve been at over 90 percent operating efficiency and a lot of the other players are very high as well. If you roll back to 2012-2013, then the North Sea had a shocking record of about 65 percent.”

 

BP is revitalizing two aging fields off the Shetland Islands.  Under the Quad 2014 project, the Schiehallion and Loyal fields are expected to add 130,000 b/d to production.

In September, Mark Thomas, BP’s regional president for the North Sea said the company’s cost of production had fallen to between $16 and $17 a barrel from above $30/barrel in 2014.

James Davis told Reuters “There is the obvious hurdle of limited remaining reserves, but operators appear to be positioning themselves to extract as much as possible out of what is left, at relatively low costs.”

Along with the majors, small explorers like Hurricane Energy have been able to tap into existing infrastructure and use new technology to make smaller fields profitable.

Hurricane specializes in extraction from naturally fractured rock.  Last week, it more than doubled the amount of oil it estimated was recoverable from its Lancaster field.

“The game has changed, but the North Sea hasn’t gone away,” Malcolm Graham-Wood of consultant Hydrocarbon Capital told online markets platform StockTube in March.

Early in the year, the North Sea market attracted about $4 billion in acquisitions.

Despite the recent activity, Oil & Gas UK says that without sustained investment, up to 80 oilfields could shut by 2020.

“We are in a period where we are staving off the overall decline in the North Sea, partly through efficiencies, partly through a group of new projects,” FGE’s Davis told Reuters.

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