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Monday 1 March 2010

Industry survey sees project numbers rise

Field development plans by UK offshore operators are increasing and 11 Bn bbl of new projects is underway requiring £60 Bn of new investment, an industry report has revealed. The rise in predicted spending is 15% higher than the previous year which industry association Oil and Gas UK says underlines the remaining development potential of the British offshore sector, but its report also says reserves being developed or in production have fallen, as new projects fail to meet the economic hurdles set by companies to achieve commercial success.

“The increase in the number of new UK oil and gas developments under consideration is, on the one hand, encouraging,” declared Mike Tholen, economic director of Oil and Gas UK, after the results of the latest Oil and Gas UK Activity Survey were published. Tholen went on.: “It confirms our belief that the province, whilst mature, has decades still to flourish.” Offshore operators continue to develop and deploy high technology offshore, to unlock more oil and gas resources, Tholen said. But he continued: “However, even that is not proving enough, illustrated by the production decline and falling investment seen over recent years. Things are made no easier by the fall in wholesale gas prices which have halved over the last year.”

The £60 Bn of spending and 11 Bn bbl of new developments is based on project forecasts from 70 operators at the end of last year, which showed a 15% rise in development work over 2008. Oil and Gas UK,  the voice for the majority of UK offshore operators, also says in its latest activity report that the UK's proven reserves now stand at 5.25 Bn bbl of oil, down from 6 Bn in the previous survey. Reserves classed as probable or possible, which have yet to see investment increased to 16 Bn bbl,  a rise of 60% on the previous year.

“How long the UK continues to operate as a significant oil and gas province will depend, crucially, on its ability to convert its discoveries into ‘proven’ reserves while at the same time ensuring a healthy crop of possible new developments are brought into company plans through steady exploration,” says the association. And it warns: “If the infrastructure needed to maximise recovery is to be preserved, £25 billion capital spend must be delivered within the next five years,” the organisation says.

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