North Sea crude and condensate production will increase by roughly 50,000 barrels per day to an average of almost 2.9 million barrels per day in 2017, according to the Europe Watch report of the US-based ESAI Energy.
“Additional supply from new project start-ups as well as light maintenance schedules will counteract legacy declines at mature fields and boost overall output,” said the report. “However, with few new major projects slated to come online after 2017, production will begin to fall in 2018 by roughly 40,000 barrels per day.”
The analysts recall that in the years since the crude price drop, North Sea producers have slashed operating costs in order to sustain and expand output.
“By renegotiating service contracts and focusing on the most promising fields, companies have been able to bring online projects, sanctioned at higher crude prices, profitably,” said the Europe Watch report. “Producers in the UK also received a small assist from the government in the form of reduction in the headline tax rate from between 50-65 to 40 percent.”
As a result of these cost adjustments, operating cash margins are higher, breakeven costs have fallen, and many producers have returned to profitability despite the historically low price environment, according to ESAI Energy.
However, ESAI Energy analyst Ian Page points out that expanding production to offset decline will remain difficult and ESAI Energy expects total production to begin falling in 2018.
Energy Security Analysis, Inc. (ESAI), founded in 1984, is a global energy consulting company that provides market research and strategic advisory services.