* Group lowers 2013 forecast to 1.2 mln-1.4 mln boepd from
* Sees 2014 output similar to 2013, had forecast growth in
* Industry group says production efficiency in "worrying
By Andrew Callus and Sarah Young
LONDON, Aug 21 Britain's North Sea energy output
will fall this year more sharply than forecast in February as
ageing fields grow less productive and need more maintenance,
and it will not start to pick up until 2015, Oil & Gas UK said.
The industry association also highlighted in a report on
Wednesday that the production efficiency of existing North Sea
oilfields "remains in worrying decline" despite an upsurge in
investment this year.
Drops in oil and gas output have held back Britain's economy
in recent years, hitting attempts to stimulate growth, which is
expected to be a major issue in the 2015 general election. The
body's forecasts disappoint expectations for the pace of a
The group said it now expected production of between 1.2
million and 1.4 million barrels of oil equivalent per day
(boepd) this year, with similar output in 2014, before an
In February it had forecast that Britain would pump 1.45 to
1.5 million boepd this year before production would start to
climb in the 2014-17 period, representing the first rise since
Oil and gas production has fallen by about two thirds since
2000, posting particularly steep falls of 14.5 percent last year
and 18 percent in 2011.
In its annual economic report, Oil & Gas UK also softened
its medium-term outlook for North Sea production to reach 2
million boepd by 2017, to say it could "potentially" rise
towards that level in three years' time.
Offshore UK oil and gas capital investment would reach a
record 13.5 billion pounds ($21 billion) in 2013, as much as 6
billion pounds more than two years ago, the report said.
"Despite impressive investment in new developments, the
production efficiency of existing assets remains in worrying
decline," Malcolm Webb, the body's chief executive, said.
Not only is production declining fast from ageing fields,
some of which have been in production for more than three
decades, but old infrastructure costs more and takes longer to
be kept sound, while more unplanned maintenance is needed.
North Sea platforms are standing idle for an average of 146
days a year, or only pumping oil and gas for 60 percent of the
year compared with 80 percent of the year in 2004.
The divergence between lower output and higher spending
reflects the cost inflation affecting the whole industry plus
the extra spending required to squeeze out reserves and produce
smaller amounts from trickier and more distant fields.
The gloomier outlook for the North Sea could be a setback
for the Scottish National Party which wants independence and
sees the economic basis in the roughly 90 percent of Britain's
oil and gas that is in Scottish territory. Scotland will hold a
referendum in September next year on leaving the United Kingdom.
Britain's Department of Energy & Climate Change (DECC) in
June launched a review aimed at facing the problems of ageing
infrastructure in the 40-year-old oil and gas province.
The leader of the review is Ian Wood, recently retired
chairman of British oil services company Wood Group, who
has pointed to a risk that failing infrastructure might leave
useful nearby reserves stranded and uneconomic to produce.
"The Wood Review ... is also very timely, and we very much
look forward to seeing the recommendations early in 2014," Webb
"With 15 to 24 billion boe still remaining to be developed,
the UKCS (UK Continental Shelf) possesses great potential for
contributing to economic growth for decades to come," he said.
The industry is pinning its hopes for a turnaround from 2015
on new developments west of the Shetlands, where the largest oil
companies like BP are investing billions, and on smaller
companies like EnQuest which specialises in extending
the life of oil fields.
It is also placing hopes in the new developments of
harder-to-extract heavy oil.
EnQuest is aims to bring onstream the Alma/Galia development
- a revitalisation of Britain's first producing oil field, but
said this month the project would be delayed from this year to
early next year.
The oil and gas industry says it is the biggest contributor
to national gross value added among industrial sectors and
provides 15 percent of total receipts from corporate taxation.