Page 13 - EurOil Week 45

EurOil PERFORMANCE EurOil

UK output set to fall in 2020

after slump in drilling

UK UK oil and gas production is slated to fall this Only 54 wells were drilled from January to
year as drilling slumps to its lowest level since October, versus 112 during the whole of last
It will take three years the 1970s, Oil and Gas UK (OGUK) warned in a year. A mere six exploration wells were drilled,
for the industry to report on November 11. and it is possible that no more will be sunk before
recover, OGUK has Output surpassed the average in the first half year-end.
warned. of 2020, as companies delayed non-essential The slump in drilling follows on from a recov-
maintenance and repair runs amid coronavirus ery in 2019, when the North Sea saw increased
(COVID-19) restrictions. But it collapsed in rates of both exploration and development drill-
August and September as some of the postponed ing, and enjoyed efficiency gains.
work finally took place. All this bodes ill for the North Sea’s compet-
That output remained stable for as long itiveness compared to other basins around the
as it did was a “significant achievement,” world.
OGUK said. Production could also rebound OGUK warned that “lower levels of new pro-
in the fourth quarter as maintenance is duction are now expected to come on stream in
eased. But it warned that the risk of corona- 2020 and 2021 in comparison with recent years,
virus infections and weak market conditions due to the operational impact of COVID-19 and
would affect companies’ plans for general the low commodity prices.”
activity in 2021. Also factoring in lower-than-expected levels
Oil production slid 4% in the first seven of barrel-adding activity, this will likely hit pro-
months of the year to around 1.1mn barrels per duction levels in 2021 and 2022, the association
day (bpd), the government estimates. said.
It will likely take two or three years for invest- On the bright side, OGUK said some work
ment levels to rebound, the OGUK warned, was being continued with a “significant number
projecting that overall spending this year would of opportunities being matured.” But it noted
decline by GBP3-4bn ($4-5bn), from GBP14bn the distressed state of drilling and rig compa-
in 2019. nies needed to implement these projects. Many
“Increasing activity and investment levels are undergoing US Chapter 11 bankruptcy
from those seen this year will be important from restructuring.
a reserves progression perspective and are also “Decisions that companies are being forced
vital in providing new opportunities for the to take now will have a lasting impact on the
supply chain,” the OGUK explained. But “it will capabilities across the industry,” OGUK said. “It
take time for the activities lost this year to be is important that activity levels on the UK Con-
recovered and it is not simply a case of moving tinental Shelf [UKCS] keep pace with those in
everything into 2021. OGUK anticipates it could other basins to ensure it remains a competitive
take two to three years to re-phase and recover place for supply chain companies to anchor and
the activity lost from 2020.” invest in resources.” ™

Week 44 12•November•2020 www. NEWSBASE .com P13