Last hurrah for North Sea oil expected this year according to Wood Mackenzie

 
Nell Mackenzie
Follow Nell
An oil rig in the background and seagulls in the foreground
British oil production expected to fall according to Wood Mackenzie (Source: Getty)

North Sea oil production will peak this year before falling back in 2018, according to a new report by Wood Mackenzie, a global energy consultant.

This is because of a lack of investment and exploration, the analysts say.

In 2017 British oil production will rise for the third straight year, but analysts say this is the peak.

Fourteen oil fields are expected to start production after delays and long production starts, and those new fields will bring 1.9 million barrels of oil equivalent out of the North Sea each day.

Industry capital expenditure is expected to fall 30 per cent. The estimated cost of decommissioning in the UK will reach £1.9bn.

Read more: Oil prices have plummeted below $55 per barrel

The North Sea is a rough place to find oil. According to Fiona Legate, a senior analyst at Wood Mackenzie, many of the subsea fields are risky.

Exploration in these areas is a gamble because there is no guarantee of oil, while the cost to explore so deeply in the wilds of the North Sea - with freezing temperatures and deep waters - carries a much higher expenditure than in the shallow beach climes in places like the Gulf of Mexico.

Finding and then producing oil in a field 1,115 meters deep in the ocean, such as the Rose bank fields off the Shetland Islands, can be a ten-year process.

Read more: Hurricane Energy whips up a storm with "significant" North Sea oil find

However, Legate expects that higher oil prices will bolster confidence and larger oil producers like Shell, BP and Conoco might return to oil exploration in areas to the west of the Shetlands.

This year’s development spend will reach only half of its 2014 level.

Shell and Exxon Mobil will be the largest companies involved in the North Sea decommissioning and the amount spent on the project will step up as the year goes on.

Related articles