More than a third of the remaining oil in the North Sea basin may never be extracted if prices do not improve, a new study has warned.
Economists at Aberdeen University have modelled the impact of $25, $35 and $45 per barrel prices on the industry,
At the lowest figure, the research finds, up to 35 per cent of the remaining deposits will not be economically viable to recover.
The combination of a massive supply glut and a total collapse in oil demand due to the coronavirus crisis has pushed oil prices to 20 year lows in recent weeks.
In April, Brent crude, which was trading between $60 and $70 at the beginning of this year, plunged to $16 a barrel, its lowest price since the millennium.
Prices have now recovered a little, but the worldwide standard is still trading around $35, despite enormous production cuts from oil producing nations.
Even at the highest price of $45, the report finds that 28 per cent of the basin’s oil may still have to be left where it is.
The research is another blow to the North Sea oil industry, which has been buffetted by the recent extreme fluctuations in the market.
In March, industry association Oil and Gas UK (OGUK) warned that up to 300,000 jobs could be at risk due to the collapse in demand.
It also warned that capital spending on the shelf would drop about 30 per cent this year in response to the volatility.
Last week it was revealed that mid-cap explorer Premier Oil was seeking to revise the price of its acquisition of two fields from oil giant BP due to the change in circumstances.
Ross Dornan, OGUK’s market intelligence manager said: “OGUK continues to work with governments and the Oil and Gas Authority to understand how we can protect the sector now, support its recovery and accelerate net zero opportunities.
“We know that low oil and gas prices, along with the impact of Covid-19 on operations, have created a very uncertain outlook.
“Remaining as competitive as possible to attract investment, alongside innovative and flexible approaches and business models, will be required to ensure we can not only continue to meet as much of the UK’s energy needs from domestic oil and gas, but also prepare the UK to fully capitalise on net zero opportunities of the future.”