Ageing North Sea not helped enough by $60 oil
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By Simon Webb and Margaret Orgill
ABERDEEN (Reuters) - A late-life exploration boom sparked by crude prices over $60 will not be enough by itself to slow the long term decline of UK North Sea oil and gas output.
Much more investment is needed to alleviate the drop in production from the sector, with its rusting infrastructure and aging staff, executives and analysts say.
Oil output in the region peaked six years ago and declined at 10 percent per year in 2003-2004.
At current decline rates, platform and pipeline closures may mean small oil and gas fields that have yet to be tapped will be left intact, as there will be no economical way of getting production to market.
"The basin needs to be reinvigorated to avoid a substantial volume of reserves from being left behind," Paul Blakeley, vice president of independent producer Talisman Energy (TLM.TO: Quote, Profile, Research) told an industry conference held in Britain's oil city of Aberdeen.
Also hampering operators are rising costs as rates for drilling rigs have doubled, thanks to hectic oil and gas activity around the world.
Higher costs have eaten into exploration and production budgets, while capacity constraints have slowed expansion plans.
U.S. major Chevron (CVX.N: Quote, Profile, Research) had to delay appraisal well drilling at its West of Shetland deepwater Rosebank/Lochnager oilfield from this year until next year. The field could be one of the largest North Sea oil finds for several years.
A shortage of rigs that are capable of drilling in Arctic conditions has also limited activity in the northern frontier area of the North Sea, said the Chairman and CEO of oil services giant Schlumberger (SLB.N: Quote, Profile, Research) Andrew Gould.
BRITAIN INCREASES MONITORING
The UK government has increased its monitoring of North Sea assets as it looks to ensure maximum recovery from the fields.
Energy Minister Malcolm Wicks said this week that the government had written to the operators of 34 assets covering 65 fields where he said there had been a "worrying reduction" in development activity over the period 2001 to 2004.
Increased competition for oil and gas fields has boosted oil recovery rates in the North Sea. Smaller and independent operators have bought up assets as they look to exploit fields that oil majors had previously deemed unprofitable.
These newcomers hope that more assets will come their way, and many small companies have entered UK licensing rounds over the past three years.
But oil majors still hold 75 percent of oil production in the region. Political stability and open access to reserves have led to majors refocusing on North Sea opportunities.
A shortage of trained staff and the aging of the engineers involved in the North Sea has also limited expansion across the industry.
BP (BP.L: Quote, Profile, Research) said it would need to replace 40 percent of its North Sea staff in the next 10 years as they retire.
"There is a problem attracting young engineers," said David Pridden, the Chief Executive of industry body Subsea UK. "The North Sea is perceived to be a sunset industry."
TECHNOLOGY
The shortage of engineers is limiting the application of new technology to increase recovery rates in existing fields and push back frontiers in deepwater and the Arctic.
Recovery rates of oil reserves in the North Sea stand at around 30 to 35 percent. If the industry can boost that rate by just a few percent, it will increase potential output by billions of barrels.
There is no one technology that will dominate the pursuit of enhanced recovery, executives say.
"There will be no silver bullet," said Schlumberger's Gould. "Rather it will be a combination of technologies."
Subsea technology has been one of the fastest growing areas, and production from wellheads on the seabed is expected to overtake output from conventional rigs in the North Sea by 2010.
Subsea facilities are cheaper than conventional rigs, and allow exploitation of small fields near existing infrastructure that had previously been deemed too costly.
By Simon Webb and Margaret Orgill
ABERDEEN (Reuters) - A late-life exploration boom sparked by crude prices over $60 will not be enough by itself to slow the long term decline of UK North Sea oil and gas output.
Much more investment is needed to alleviate the drop in production from the sector, with its rusting infrastructure and aging staff, executives and analysts say.
Oil output in the region peaked six years ago and declined at 10 percent per year in 2003-2004.
At current decline rates, platform and pipeline closures may mean small oil and gas fields that have yet to be tapped will be left intact, as there will be no economical way of getting production to market.
"The basin needs to be reinvigorated to avoid a substantial volume of reserves from being left behind," Paul Blakeley, vice president of independent producer Talisman Energy (TLM.TO: Quote, Profile, Research) told an industry conference held in Britain's oil city of Aberdeen.
Also hampering operators are rising costs as rates for drilling rigs have doubled, thanks to hectic oil and gas activity around the world.
Higher costs have eaten into exploration and production budgets, while capacity constraints have slowed expansion plans.
U.S. major Chevron (CVX.N: Quote, Profile, Research) had to delay appraisal well drilling at its West of Shetland deepwater Rosebank/Lochnager oilfield from this year until next year. The field could be one of the largest North Sea oil finds for several years.
A shortage of rigs that are capable of drilling in Arctic conditions has also limited activity in the northern frontier area of the North Sea, said the Chairman and CEO of oil services giant Schlumberger (SLB.N: Quote, Profile, Research) Andrew Gould.
BRITAIN INCREASES MONITORING
The UK government has increased its monitoring of North Sea assets as it looks to ensure maximum recovery from the fields.
Energy Minister Malcolm Wicks said this week that the government had written to the operators of 34 assets covering 65 fields where he said there had been a "worrying reduction" in development activity over the period 2001 to 2004.
Increased competition for oil and gas fields has boosted oil recovery rates in the North Sea. Smaller and independent operators have bought up assets as they look to exploit fields that oil majors had previously deemed unprofitable.
These newcomers hope that more assets will come their way, and many small companies have entered UK licensing rounds over the past three years.
But oil majors still hold 75 percent of oil production in the region. Political stability and open access to reserves have led to majors refocusing on North Sea opportunities.
A shortage of trained staff and the aging of the engineers involved in the North Sea has also limited expansion across the industry.
BP (BP.L: Quote, Profile, Research) said it would need to replace 40 percent of its North Sea staff in the next 10 years as they retire.
"There is a problem attracting young engineers," said David Pridden, the Chief Executive of industry body Subsea UK. "The North Sea is perceived to be a sunset industry."
TECHNOLOGY
The shortage of engineers is limiting the application of new technology to increase recovery rates in existing fields and push back frontiers in deepwater and the Arctic.
Recovery rates of oil reserves in the North Sea stand at around 30 to 35 percent. If the industry can boost that rate by just a few percent, it will increase potential output by billions of barrels.
There is no one technology that will dominate the pursuit of enhanced recovery, executives say.
"There will be no silver bullet," said Schlumberger's Gould. "Rather it will be a combination of technologies."
Subsea technology has been one of the fastest growing areas, and production from wellheads on the seabed is expected to overtake output from conventional rigs in the North Sea by 2010.
Subsea facilities are cheaper than conventional rigs, and allow exploitation of small fields near existing infrastructure that had previously been deemed too costly.
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