Offshore oil and gas firms concerned over record low drilling
The UK’s offshore energy industry has expressed “serious concerns” over the recovery of the sector despite stable oil and gas prices as drilling activity looks set to drop to its lowest level since 1965.
Oil and Gas UK, the representative body for the UK’s offshore firms, warned that capacity constraints could be felt across the supply chain in the next few years.
But it said operating costs had halved in recent years and production was on track to be 20 per cent higher than in 2014.
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The organisation’s chief executive, Deirdre Michie, said: “The industry is emerging from one of the most testing downturns in its history.
“Despite the improvements seen in recent years, we find ourselves at a crossroads. Record low drilling activity, coupled with the supply chain squeeze, threaten the industry’s ability to effectively service an increase in activity and maximise economic recovery.”
Only four exploration and five appraisal wells were drilled in the first eight months of the year, Oil and Gas UK’s economic report showed.
Even with more wells to come in the final few months of the year, the organisation said exploration activity for the year would be the lowest since 1965.
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Michie said a drive for increased activity was needed but that investment conditions were key to the long-term future of the North Sea industry.
The report predicted volatile oil price movements would continue to make investors reluctant amid a shift in the energy market towards a low-carbon future.
Ahead of the report’s publication today, oil prices rose yesterday as sanctions on Iran’s oil sector edged closer.
A US rig count by Baker Hughes showing a fall in the number of rigs last week has also given further support to prices as Brent crude rose to $77.50 per barrel.