Worst year for North Sea exploration

The oil sector’s efforts to make the North Sea more competitive will be “irreversibly damaged” without an influx of new investment, an industry expert said yesterday.

Adam Davey, market intelligence manager at Oil and Gas UK, said the North Sea “urgently” needed more capital expenditure and that the supply chain was reliant on new projects for work.

Speaking at the Offshore Europe conference in Aberdeen, Mr Davey warned that with few new offshore developments being sanctioned, there is a risk that suppliers will move away from the basin. “Once they’re gone, it won’t be easy to attract them back,” he said.

Mr Davey said most investment in the North Sea was the “legacy of old field approvals”, while the basin is line for its worst year on record for exploration.

Mr Davey said the sector could not “tolerate many more years of such limited investment”.

The economic report said North Sea companies had £40 billion worth of potential development opportunities in their business plans. Mr Davey said industry’s “good work” would be “irreversibly damaged” if part of that investment does not start coming through.

He claimed the North Sea is the most expensive basin in which to operate globally but added that the UK had become a more attractive place to invest in recent years. He said he was confident there will be more field approvals in the next few years.

Mr Davey added: “There are opportunities and we need to unlock them. We’re well along the path.”

Wood Group chief executive Robin Watson said the decline in investment in recent years had been “profound” and that the “skill migration” away from the North Sea had been stark.

He said: “Many people won’t return and we are a less attractive career proposition for young people. We should be concerned and thoughtful about that.”

Mr Watson did say North Sea industry had responded to its challenges but said the sector still had a “mixed scorecard” and needed to start making different types of improvements.

Investment warning: Adam Davey, market intelligence manager of Oil and Gas UK.