North Sea oil and gas regulator hails ‘positive performance’ by firms

North Sea oil and gas firms made progress on key measures amid challenging conditions last year but more sharp cuts in investment in the area are looming, the sector regulator has found.

2020 was a tough year for the North Sea supply chain as firms that operate oil and gas fields slashed spending in response to the fall in demand that accompanied the imposition of lockdowns around the world.

However, the Oil and Gas Authority said the results of a survey it completed showed performance on the United Kingdom Continental Shelf had remained positive in 2020, with some improvements from the previous year.

The OGA noted that production efficiency had remained at 80 per cent, in line with its target.

Carbon dioxide emissions from offshore installations and terminals were reduced by 10 per cent while the amount of gas flared fell by 20%.

The average costs of production fell to £11.1 per barrel down £1/bbl on the preceding year.

Industry leaders have made the reduction of average operating costs a key focus of their efforts to help ensure the North Sea can compete for investment with other areas.

The OGA said: “Recent discoveries in the UKCS particularly in the Central North Sea have been high in volume, indicating the quality that the basin still offers and highlighting the need for energy transition-conscious exploration.”

However, exploration activity slumped last year as firms cut discretionary spending. The OGA noted only seven exploration wells were drilled, the lowest total for eight years.

Capital expenditure in the basin over the next five years is forecast to drop by £2.9 billion.

Scott Robertson, director of operations at the OGA, noted a lot of activity was delayed or deferred last year due to the impact of the combination of Covid-19 restrictions and low oil and gas prices.

He said that in the year ahead it would be important for firms to maintain high levels of performance as activity ramped up, “both in traditional oil and gas activity as well as the net zero and energy transition opportunities our basin offers”.

The OGA said the fall in operating costs reflected the impact of the pandemic. Costs are forecast to rebound in the next few years.

The production efficiency measure compares the total output achieved with the level thought to be possible.

Read the latest issue of the OGV Energy magazine HERE.