A prominent petroleum economist is urging government to introduce policies paving the way for the delivery of more UK North Sea oil.
Prof Alex Kemp, of Aberdeen University, warned of “substantial uncertainty” surrounding the development of hundreds of UK oil and gas fields due to the region’s heightened “sensitivity” to crude price swings.
He said 415 fields could be categorised as “technical reserves” − discovered fields not currently being actively considered for development.
Prof Kemp said the development, or discarding, of these fields would go a long way to determining the pace of activity in the UK continental shelf (UKCS) and production decline over the remaining life of the basin.
He recommended the creation of policies to encourage projects that develop multiple fields in “clusters”.
Prof Kemp said the Oil and Gas Authority’s use of area plans to maximise oil and gas recovery in specific locations was a step in the right direction.
The promotion of technologies which cut emissions would help reduce project expenditure when “environmental damage costs” are factored in, Prof Kemp said.
Diesel and gas turbines used for generating power on offshore platforms could be phased out and replaced with renewable energy sources.
A number of oil majors with UK portfolios, including BP, are currently considering plans to power their platforms from shore with green energy.
Prof Kemp made the observation in a report titled, “Prospects for Activity in the UK Continental Shelf: the late 2019 Perspective”, co-authored with colleague Linda Stephen.
The study suggested that a $10 swing in the average crude price out to 2050 could make the difference between dozens of fields being developed or left stranded, such is the UKCS’s vulnerability.
At prices of $50 per barrel of oil and 35p per therm of gas, only 81 fields classed as “technical reserves” will be developed, compared to 207 at $60 and 45p.
At $70 and 55 pence, the number of fields in that category reaching a final investment decision will hit 238. This scenario would still leave a large number of fields stranded.
Based on a price of $50, oil and gas recovery would decline at a sharp pace, with total production stopping at 8.7bn boe, compared to 12bn boe with a price of $60, and 14.5bn boe at $70.
Mike Tholen, upstream policy director at Oil and Gas UK, said lower oil prices were “here to stay” and and that “innovative thinking” would be required to realise “fresh opportunities”.
Mr Tholen said: “Although oil prices remain an important factor, the relentless focus on cost and industry collaboration on a range of issues provides a solid framework for investors.
“This is an industry already in action with our blueprint for net zero outlining our commitment to emissions reduction from the operational production of oil and gas while providing the safe, sustainable and competitive energy the UK needs.”
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