UK Oil Industry Seeking Gov. Protection - 105/176 Licensed Firms Have No Production, Developments

[hatrack]

LONDON — The U.K. oil industry is pressing for big tax breaks in next week’s government budget, warning that dozens of small oil companies operating in the North Sea will go bust without help, which in turn could accelerate a decline in U.K. oil and gas production. The warnings come as smaller players in the industry reel from low crude prices, high costs and shrinking credit. Many are cutting investment and drilling fewer wells.

EDIT

For decades, the North Sea has been one of the world’s great sources of oil and gas, providing a critical complement to the Middle East. Some 39 billion barrels of oil equivalent have been produced from North Sea fields since the early 1970s. An estimated 25 billion barrels remain to be recovered.

But the basin is maturing rapidly, and output has been declining since 1999. New discoveries are miniscule compared to the big finds of its heyday and are harder to develop. Some of the world’s biggest oil companies, such as BP PLC and Royal Dutch Shell, have reduced their exposure to the North Sea and have shifted their focus to places like Canada and offshore Angola. The U.K. government has opted to lure smaller players with low-cost licenses. But many of these independents have seen their access to debt and equity dry up. At the same time, the price of oil, down around $100 a barrel from the record set of last summer, has made some projects uneconomical.

Of the 176 companies that hold U.K. petroleum licences, 105 are neither producing oil or gas nor have fields under development, according to energy consultancy Hannon Westwood. Without cash flow to finance operations, “they will disappear,” said Chris Bulley, a partner at Hannon Westwood. Already, the number of exploration wells drilled in the first three months of this year fell 78%, compared with the same period a year earlier, according to accountancy firm Deloitte. A big factor was financial turmoil at Canada’s Oilexco Inc., which had been one of the most active explorers in the North Sea. Oilexco’s North Sea unit was placed under administration in January. The unit was bought by Premier Oil PLC last month.

EDIT

http://royaldutchshellplc.com/2009/04/17/north-sea-protection-uk-oil-industry-seeks-aid/

[Arctic Dave]

1. If any oil company thought that the prices were going to stay that

high are not very good at knowing the history of their own industry. Oil has always acted on boom, bust cycles. Now they want a hand out after insanely high profits from last year?

[NickB79]

2. This has less to do with oil price crashes and more to do with peak oil production, IMO

The fields are played out. The North Sea oil patch has been in decline for years already, just like Cantarell in Mexico. Even if oil were still at $100/barrel, their output would be falling along with their profits. The boom-bust cycle in this particular area of the world has ended; most of those oil wells requesting bailouts now are not coming back even if oil goes back up again because they have nothing left to pump.

[hatrack]

3. As I recall, UK North Sea rolled over in 1999, Norway in 2001 . . .

For conventional oil, that is. Still some elbow room in natural gas, particularly beyond the North Cape.

[Arctic Dave]

4. $100.00 bbl would only have postponed the inevitable in their

existing fields. By the tone of the article it sounds like they want them to help secure and finance new endeavors.