North Sea activity falls but outlook still strong

thE UK energy industry should surely now qualify for publicly listed status as a lightning rod for dissatisfaction. Consumers are angry about more double-digit rises in the cost of gas and electricity, and the Archbishop of Canterbury has weighed in.

Justin Welby has branded the rises “inexplicable” and urged the likes of rWE, Scottish Gas and Scottish hydroowning SSE to temper their pursuit of Mammon with “generosity”. Good luck with that one, archbishop.

Britain’s other major energy players are virtually bound to plug into the prevailing hang ’em high rises zeitgeist, flying in the face of Ed Miliband’s promise – electoral bribe? – to freeze prices if Labour wins the next election.

With almost

ineffable

timing, North Sea drilling activity eased during the third quarter of 2013 after an encouraging second quarter but the outlook remains positive, the latest Deloitte report into the sector reveals today.

A total of 11 exploration and appraisal wells were drilled on the UK Continental Shelf (UKCS) during the third quarter of 2013 – five fewer than during the second quarter and six fewer than the same period last year.

Despite the fall in figures for the UKCS, the Norwegian Continental Shelf (NCS) has produced eight more wells during the third quarter than the same period last year.

Graham Sadler, managing director of Deloitte’s petroleum services group, pictured below, said a number of factors may have affected the UK drilling figures over the summer, which is often a peak period for drilling.

“Many companies have commitments to drill wells from recent licensing rounds which are yet to be fulfilled, so we may well see these materialise in the coming months, drawing a more positive conclusion to the end of the year,” he pointed out.

however, while UK offshore slowed, deal activity saw an upturn. During the third quarter there were 14 deals reported, two more than during the same period in 2012.

Farm-in agreements, where one company takes a stake in another’s field, often to assist with drilling or development costs, accounted for more than half of UK deals.

Graeme Sheils,

the coalition government has confirmed the first new nuclear plant in Britain in a generation, to be built by the French company EDF with generous subsidies from the taxpayer. these will feed through to consumer bills when the plant opens at hinkley Point in Somerset in 2023.

the archbishop knows better than most about consumers perhaps needing the patience of Job, and yesterday’s announcement gives an unintended energy partner at Deloitte in Aberdeen, said the prospects for the region were strong.

he said: “While the most recent drilling figures are lower than expected, one quarter does not tell the whole story. Business confidence continues to be positive around the outlook for UKCS, with the oil service sector seeing high activity levels on the back of strong production.”

Smaller explorer companies have continued to show interest and enter the North Sea, which he said in part explained the prominence of the farm-in deals the region has seen recently.

Sheils added: “these players, as well as others, have a vast number of considerations when planning drilling programmes and there is no doubt that these have altered as a result of the maturity of the UKCS and accessibility to finance.

“the North Sea remains a focus for investment and we do not expect this to change in the very near future.”

the most active companies in terms of acquisitions during the third quarter of 2013 were Spike Exploration, which is currently bidding to acquire Aberdeenbased Bridge Energy, hansa hydrocarbons and the Kuwait Foreign Petroleum Exploration Company.

Ithaca Energy and Premier oil were among the most active companies in terms of divesting or farming down assets. Across north west Europe, 26 deals were announced during the third quarter of 2013, one fewer that last year.

During the quarter, only one field came onstream in the UK. StroNG performances at Scotland’s most northerly airports contributed to a rise of nearly 10 per cent in the number of passengers using regional hubs last month.

operator hial handled 126,672 passengers overall in September, an increase of 11,229, or 9.7 per cent, on the same month last year.

the group, which runs 11 airports north of the Border, pointed to “particularly strong

so-called trickle- meaning to society’s down effect.

to chafe the running sore of the UK’s energy policy, the Chinese are to take a 30 to 40 per cent stake in the new nuclear assets, with the obvious security implications and the government’s bizarre nonchalance about the prospect.

David Cameron did a national pride, Somerset jobs and energy security gig yesterday. the new nuclear plant will supply 7 per cent of Britain’s energy, but, crucially, the hinkley owners are promised double the current market rate for their electricity.

Many greens are nauseated, however, because they see freehanded nuclear subsidies meaning less for wave, wind and solar energy. Nobody is happy.

In truth, there is probably no sim- ple “solution” as we look to be witnessing systemic rather than cyclical change in the global energy industry.

Energy nationalism is a wild card, sparking security of supply fears. the environmental evidence mounts monthly of the damaging impact of global warming. And austerity is probably with us for another five years at least.

Nuclear is a clean alternative, but following the higher safety requirements after the Fukushima blowout in Japan, nuclear companies cannot bankroll investment without controversial government – ie taxpayer and consumer – pain.

Energy is similar to another basic industry supplying UK consumers: food. A major component of the march of food prices upwards is a rising tide of middle classes in emerg- growth” at Sumburgh airport in Shetland, pictured above, and Wick John o’Groats, the UK’s most northerly mainland airport.

Wick handled 4,634 passengers in September, up 119 per cent compared with the same month last year.

Some 25,447 passed through Sumburgh last month, up 58 per cent on last year’s figure.

Airline Loganair recently increased capacity between ing markets. these newly aspirational waves of people naturally want good meat and fish products rather than cheap staples, and are putting pressure on prices in wholesale food markets.

that is feeding through to supermarkets, with scandals like horsemeat in the food chain pushing up their and suppliers’ security costs as well.

As with energy, the food landscape is changing systemically before our eyes and wallets. In two of the basics for living – food and warmth – things look irreversible, with issues such as nuclear sweeteners or green subsidies changing little.

We are unlikely to starve or freeze. But the new realities of higher costs in both energy and food look permanent beneath the recurring moral, financial and political jousting. Twitter: @martinflanagan8 Wick John o’Groats and Edinburgh and is providing more flights between Sumburgh and Glasgow from November, hial said.

Growth at Kirkwall, Inverness and Islay airports also contributed to the overall increase in passenger numbers for hial.

But numbers were down at Barra, Benbecula, Campbeltown, Dundee, Stornoway and tiree airports.