London: With oil price plummeting, nearly 150 uneconomic oil platforms in the UK North Sea are expected to be scrapped over the next 10 years, according to industry analysts.
Of all the decommissioning over the next 25 years, more than half is likely to take place between 2019 and 2026. The estimate, from Douglas-Westwood, takes account of the fall in the price of oil. Crude prices have plunged around 70 per cent over the past 18 months to around USD 35 a barrel.
The estimate said this will result in many oil fields in UK waters, including the North Sea, becoming uneconomic. Another consultancy, Wood Mackenzie, reported on Friday that, at recent prices, one in seven barrels of oil being produced in UK waters is at a cash loss.
It said the UK is the country third most likely to see oil fields permanently shut down as a result of low prices, the BBC reported. Canada and Venezuela have more production at a cash loss. Prices are falling as a result of too much supply and too little demand.
China's economic slowdown has curbed appetite for commodities in general, while Saudi Arabia, which produces a third of the Opec cartel's output, is keener on preserving its market share than it is on cutting production to boost prices.
At the same time, the rise of the US as a shale oil producer means it now imports less oil, adding to the glut on world markets. Another assessment of the North Sea, by Company Watch and commissioned by the Financial Times, suggests that half of oil and gas companies with North Sea operations are now loss- making, with total losses for the past 12 months adding up to 6.4 billion pounds.
The estimate for decommissioning 146 offshore platforms in the seven years to 2016 is part of forecast expenditure of nearly 35 billion pounds over the next 25 years. Wood Mackenzie's report drew on data from 10,000 oil fields around the world.
It found that one barrel in every 30 is being produced at a loss - in that production is more expensive than revenue.
That rises to one in seven for the UK offshore sector. Wood Mackenzie calculates that some 220,000 barrels per day are produced at a loss, out of around 1.5 million in total. It says the global picture is of a low level of oil field shut-ins, despite the low oil price. Only around 100,000 barrels of oil per day have been lost due to such decisions.
The analysts see producers as continuing to hope that the price will rise before abandoning reserves. But they said the UK is among the oil producing countries where the pressure to abandon oil fields will be highest.
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