Oil slump triggers North Sea crisis
By Steve James
5 February 2015
Demand for OPEC oil in 2015 is anticipated to be about 28.8 million barrels per day (bpd), compared with a production figure of 30 million bpd. As a result, there is a growing surplus of oil on the world market and prices are collapsing. Oil is selling for well under $50 a barrel, less than half the price six months ago.
One of the most exposed regions is the British sector of the North Sea. Production, which began in the 1970s, has been in decline since 1999, with a sharp slump following 2010. New discoveries tend, year by year, to be smaller, in deeper water, with more complex extraction. While new techniques have raised the percentage of recoverable oil, this is ever more costly. With oil at over $100 a barrel, advanced methods still allow huge profits to be recouped. At below $50, few North Sea fields, currently the most expensive offshore locations in the world, are profitable. By contrast, production in Saudi Arabia costs less than $10 a barrel.
An extended price slump poses an existential threat to much of the British North Sea-based industry, as exploration of smaller, deeper fields becomes unviable and existing fields run dry. In December, Robin Allan of the oil industry explorers’ association Brindex, told the BBC that North Sea exploration was “close to collapse.” Allan, a director of Premier Oil, complained that even at $60 a barrel, exploration was unprofitable.
Labour’s new leader in Scotland, Jim Murphy, agreed, warning, “The oil crisis is the biggest threat to jobs in Scotland since Ravenscraig.” The 1992 closure of the Ravenscraig steelworks indirectly cost up to 10,000 jobs. In Aberdeen, 13 percent of all jobs are oil-related and the northeast of England hosts a number of production sites, but oil-related jobs are scattered across the UK. In total, estimates of oil-related jobs in the UK run as high as 450,000. Of these, 35,000 are said to be imperiled, including 16,000 in Scotland.
At: http://www.wsws.org/en/articles/2015/02/05/scot-f05.html
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Thatcher's legacy lives on. The irony of it is that the Iron Lady owed the boomlet of the late 1980s largely to North Sea largesse - which resolved Britain's longstanding balance-of-payments difficulties. But BP overextracted, without regasifying, and exported most of the oil when prices were in the $20-a-barrel range, leaving the U.K. dependent on imports in this era of expensive oil (the recent slump notwithstanding). After peaking at 2.7 million barrels per day in 1985 (the year BP was privatised), British oil output today is merely one fourth of that - and falling.
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