UK North Sea oil extraction falls 17%

2005 June 10
by Chris Vernon

The UK has already peaked. The rate of oil extraction from the UK portion of the North Sea is now in decline after peaking at 3.1 million barrels per day in 1999. The extraction rate today stands at 1.9 million barrels per day, almost 40% down from the peak of just six years earlier.

The Scotsman wrote (article reproduced on Rigzone.com) on Thursday 9th June 2005 that:

UK oil production fell by 17 percent year on year in March – a decline the industry said was at odds with renewed investment in the North Sea.

Output slowed as the region revealed more evidence of its maturing fields, with figures from the Royal Bank of Scotland showing that combined oil and gas was down 13.5 per cent on the period in 2004.
Rigzone

17% per year is an incredible rate of decline and testament to the advanced extraction techniques employed in the North Sea from day one. Large scale production in the North Sea didn’t start until the early Eighties, the North Sea’s cold, windy climate and the then great depths required sophisticated offshore technology and large upfront capital costs. Due to this high capital cost and relatively high interest rates at the time extraction rates were maximised rapidly to pay off the investment as soon as possible.

UK Oil Supply

As has been seen around the world the use of advanced recovery technology doesn’t generally increase the ultimate recoverable reserves but does increase the recovery rate. Extracting the same amount of oil in a shorter period of time results in a rapid increase at first, a high peak rate of extraction before declining rapidly. We are now seeing this rapid rate of decline in the UK.

This rate of decline, if it were to continue, will result in production falling to 20% of the 1999 peak in just seven years.

The article concludes:

The UK Offshore Operators Association has said that increased spend could half production decline to 7 per cent per year – extending the life of the North Sea. Investment has been put at GBP 4.31 billion for 2005.
Rigzone

Leaving us with 40% of 1999 capacity in seven years time, hardly a positive position.

In magnitude terms this 17% decline represents the loss of approximately 300,000 barrels per day. This is similar to the figure Iraq is planning to reduce it’s exports by:

Iraq plans to cut its oil exports by 15 per cent in the second half as terrorism and lack of investment take their toll on infrastructure.

The new export figures imply an export volume of 1.45m barrels a day, or 250,000 b/d below the contracts offered in the first half.
Financial Times

The reducing supply from just the UK and Iraq this year will leave the world half a million barrels per day short, putting immense pressure on existing suppliers who are struggling to meet increasing global demand already.

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