North Sea oil output jumps for second year
UK oil production rose for a second year in a row in 2016, increasing by 5% to 1.01 million b/d of oil equivalent, according to figures released Thursday, encouraging those who argue the North Sea industry still has life in it yet. For the full year, UK crude output increased by 3.2% to 914,000 b/d, while output of natural gas liquids rose 30% to 99,000 b/d, the government’s department for business, energy and industrial strategy said. “Following strong production in 2015, crude oil production from the North Sea has been steady from fields that feed into the Flotta and Forties terminals,” the department said. However, UK oil production levels remain barely a third of their 1999 peak, it added. Maintenance at the UK’s largest producing field, Buzzard, meant liquids output dropped 5% in the fourth quarter from a year earlier, to 11.57 million mt, or 979,000 boe/d. In terms of trade, oil exports increased by 5% in the full year, to 33.31 million mt, while imports fell 5.8% to 42.53 million mt, as refineries sourced a higher share of their crude from the North Sea. The numbers confirm a revival in output caused partly by a surge in investment before oil prices slumped in 2014, as well as upstream tax cuts last year, the setting up of a new regulator, and efficiency measures. Separately on Thursday, US upstream company Apache confirmed plans to start production in the third quarter of this year from a UK discovery known as Callater, which lies near the Beryl field and holds 25 million-50 million barrels of oil equivalent, mainly in the form of liquids. Output should also be boosted by the imminent restart of the BP-operated Schiehallion field west of the Shetland Islands, following a four-year redevelopment.
REALITY CHECK
While UK operators boast improvements in efficiency and lower costs, few new projects have been approved for development since oil prices plummeted in 2014, suggesting the current production uptick may be short-lived. In November, the UK’s official economic forecaster, the Office for Budget Responsibility, revised its previously more pessimistic view and said UK oil production would remain flat into 2020, at 47.1 million mt/year (roughly 974,000 b/d). However, in its latest monthly oil market report the International Energy Agency maintained that UK output was headed for decline this year, forecasting full-year liquids output of 980,000 boe/d. North Sea crude oil has been in demand from Asian buyers in recent months in part due to OPEC’s decision to curb its production last November, which has reduced the price premium between North Sea crudes and Middle Eastern crudes. (Note: DECC units converted from metric tons into barrels at a rate of 1 mt:7.55 barrels crude oil; 11.5 barrels NGLs.)
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