The boss of North Sea giant BP yesterday pledged to continue investment and exploration in the region but warned that “the worse may not be behind us yet”.
Mark Thomas, regional president North Sea at BP, revealed glimpses of oil giant’s plans for the North Sea following the publication of a report which revealed that exploration has plummeted risking production of oil and gas on the UK continental shelf (UKCS) beyond 2020.
Speaking at a breakfast event in Aberdeen hosted by trade body Oil and Gas UK (OGUK), Mr Thomas said the body’s economic report “shows the environment for operating remains very, very challenging”.
He added: “This isn’t going to change any time soon.”
Mr Thomas said BP has successfully reduced its average cost of producing a barrel of oil was now in line with the North Sea average of around $16 per barrel – having reduced this from the “mid-$30” since before the fall in oil prices.
He noted that his boss, BP chief executive Bob Dudley, coined the phrase “lower for longer”.
“We have to assume the current price environment is the new norm,” said Mr Thomas
“We must take necessary step to ensure the North Sea is competitive in a sustained $50 market.”
He added this will “continue to be painful for many people across our supply chain”.
Addressing data revealed in yesterday’s report from OGUK, he said: “The data shows that investment in the basin has reduced significantly over the past two years.
“But relative to historic levels, £9billion of expected capital invested in 2016 is still a relatively high number.
“However, unless we secure funding for the next wave of projects capital investment will fall.
“Securing that funding will not be easy.
“There will be strong competition for investment from other regions.
“Overall corporate capital budgets have reduced substantially.
“Speaking for BP, the company wants to invest in the UK.
“I have been urged to bring forward new investment opportunities.
“The North Sea has been one of BP’s big four global regions for many years and the intent is for it remain so.”
He outlined “reasons to be cheerful and indeed cautiously optimistic” about the North Sea’s prospects, including the firm’s own plans to invest in up to five exploration wells this year, as well 50-60 new wells in existing fields including Clare, Clare Ridge and Quad 204 projects West of Shetland over the next few years.
“By 2020 that will allow us to almost double our production in the UK. That is certainly resason to be cheerful,” he said.
He added that estimated North Sea reserves of between 10 to 20million barrels of oil was “still significant in global terms”.
But he added that the “single most effective way to help reverse” the decline in exploration was to “materially and consistently reduce the cost of drilling wells”.