North Sea companies to equal 2019 output despite pandemic

North Sea firms are on track to produce the same amount of oil and gas in 2020 as they did last year, despite the pandemic throwing up huge challenges, a new report reveals.

Output is expected to average almost 1.7 million barrels of oil equivalent per day this year, which is “testament to the professionalism” of those involved, Oil and Gas UK (OGUK) says in its annual economic report today.

The membership organisation also says industry and the UK Government are making “good progress” on a Nor th Sea transition deal.

It is hoped the deal will provide the frameworks and business models needed to stimulate investment in low-carbon technologies like carbon capture and storage, or hydrogen, which oil companies are helping to develop.

Yesterday, OGUK market intelligence manager Ross Dornan said formal proposals had been submitted to government for consideration, and both sides were “moving forward with active discussions” in the coming weeks.

“There is good alignment between industry and government, but it’s complex and we have to make sure the outcomes meet everybody’s objectives,” Mr Dornan added.

He also warned 2021 would be another “really difficult” 12 months for the North Sea oil and gas sector, reiterating that projects which were deferred in 2020 may take two or three years to come back into the picture.

At the start of 2020, more than £35 billion of investment opportunities were included in companies’ plans over the next 10 years.

OGUK’s new report concedes there is “real uncertainty” about the viability of many of these initiatives. It warns that halting investment will not reduce demand in the UK, but only make the country more reliant on imports.

OGUK says the UK’s “net energy import dependency” was just over 35% of consumption last year.

Britain became a net exporter of oil products for the first time in 15 years as demand slumped in the first half of 2020, but this trend is likely to have reversed already, the report adds.

OGUK is also sticking to recent estimates for North Sea job losses, saying more than 8,000 people have been laid off this year.

The sector was left reeling by a slump in oil prices earlier this year, brought on by Covid-19’s impact on demand and the collapse of an international production pact.