Oil & Gas News, September 2016

Production from UK oil and gas fields in 2015 increased for the first time in 15 years, but investment in exploration hit a record low as companies cut spending in response to low energy prices.


The 10.4% rise in output compared with the previous year was the result of a spate of new North Sea developments and technological innovations to maximise extraction from existing fields.


“As an industry we are producing at four times the rate we are discovering new reserves. This is unsustainable,” said Deirdre Michie, chief of Oil & Gas UK, in the trade group’s annual report on the state of the industry. She called for the UK and Scottish governments to spur investment with fiscal stimulus and other measures that put oil and gas at the heart of industrial strategy.

Trumpeting the industry’s efforts to maintain competitiveness in a protracted era of low oil and gas prices, Ms Michie said operating costs for offshore producers had fallen by 45% in the past two years.

This had lowered the average cost of extracting a barrel of oil or gas equivalent from more than $29 in 2014 to $16 this year.


New investment was desperately needed to prolong the life of the North Sea basin, Ms Michie added. Investment is expected to fall to about £9bn this year, from a record £14.8bn in 2014.  The North Sea has been especially badly hit by the fall in capital expenditure across the oil and gas industry in the past two years because, even after the recent productivity improvements, it remains one of the world’s highest cost offshore basins.





Drilling operations have got under way on the first production well for a major gas field in the UK North Sea. Maersk Oil is planning to drill a total of six production wells at the high pressure/high temperature Culzean field.  The first gas is expected to be produced from Culzean in 2019.


The development, which lies about 145 miles east of Aberdeen, is one of the largest gas fields discovered in the North Sea in more than a decade.


The Maersk Highlander rig is drilling the first production well.  The drilling campaign will be supported by more than 30 UK based well services companies.


Gretchen Watkins, from Maersk Oil said: “This is an important milestone in ensuring that we can deliver Culzean on schedule and with it 5% of UK gas demand in 2020-21.


In May, BP announced it had doubled its stake in Culzean as part of a £7bn investment programme. The company said it had raised its interest in the Maersk Oil operated Culzean development from 16% to 32%.  The gas condensate field has resources estimated at 250-300 million barrels.

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