North Sea sector expected to deliver major jump in new projects

Jul 15, 2004 02:00 AM

North Sea oil and gas firms are on course in 2004 to deliver a major jump in exploration, investment and projects on the UK Continental Shelf, industry leaders have revealed.
The UK Offshore Operators Association (UKOOA) said that 12 new oil and gas projects have been started in the British sector of the North Sea since January -- compared to 14 in all of 2003. Drilling has started on 22 new standalone exploration and appraisal wells -- versus 32 all last year. And investment is on track to hit £ 4.4 bn -- up about 10 % on the previous 12 months.

North Sea firms have also stopped haemorrhaging jobs. From a peak of about 300,000 either directly employed or supported by the industry four years ago, the workforce had dropped to 260,000. But the number is steadying.
Exact jobs figures for Scotland, which account for about a third of the total, are not known, but UKOOA believes there has been an acceleration in work north of the Border, as the UK industry has consolidated and work has gravitated to Aberdeen.

The UKOOA economist Mike Tholen told: "Employment in Scotland appears to be on the up. And I can't think of any reason why there would be a downturn, in this or any of the other trends we have seen, in the second half of this year." Tholen said two big positives were driving North Sea industry growth. First, there was a return of confidence around exploration, two years after the Chancellor slapped an extra 10 % tax on oil and gas profits.
"It was a severe set back, and it has taken this long for firms to accept these are now the terms in the UK," he added.

The recent success of wells around the Buzzard field -- a giant discovery in 2001 -- has also boosted optimism. And confidence has been further bolstered by the sustained high oil prices of the past six months -- topping a record $ 41 per barrel, and making borderline investments look viable.
"You can't drill quickly enough to match the current oil price, but it does make you feel confident enough to drill for the future," Tholen said.
An acceleration in production from existing assets has been the second major driver. There has been an increasing pressure on rig rates. While this has not been enough to bring many stacked rigs out into service, those already floating have been doing good business, Tholen said.

An upturn in North Sea exploration is agreed to be the linchpin of sustaining future UK oil and gas production. With 22 standalone wells drilled in the first half, the total in 2004 is on course to match the nearly 60 standalones and sidetracks completed in 2001. While this would still be sharply down from the 150 wells seen in 1990, it would mark a recovery from the lows of 2002-3.
"When you've got companies like Oilexco doing about three or four wells this year, it keeps reminding people that, yes, this may be a maturing basin but it's still a damned good place to do business," said Tholen.

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