North Sea production rose for the first time in 15 years last year, but, the industry will be extremely challenged to sustain this into 2016 and beyond and job losses are set to continue, industry body Oil & Gas UK warns.
According to government data, total oil and gas production on the UK Continental Shelf in in the first 10 months of 2015 was up 8.6%, compared to 2014. Liquids was up 10.6% and gas up 6.1%.
Oil & Gas UK expects year end production for the full year of 2015 to be 7-8% higher than last year.
Oil & Gas UK CEO Deirdre Michie says: “Given the difficulties being faced by the industry this is welcome news. In February 2015, we predicted a marginal increase in production for 2015, but the industry-wide focus on improving production efficiency coupled with investments of more than £50 billion over the last four years to bring new fields on stream across the last 12 months is paying off and yielding a better result.
However, she said: "While the UK offshore oil and gas industry is having to adapt to the low oil price and driving greater efficiencies throughout its operations, the fact is that the value of our product has more than halved. Times are really tough for this industry and for the people working in it. We will continue to see job losses as we move into 2016 and we must be thoughtful and supportive of our colleagues and their families who are being made redundant or who are at risk of being made redundant.
“As we go through these times, we have to be resilient and focus on what we need to do to get us through the coming months to ensure an enduring industry for the future.
“Even in these challenging times, we continue to have a supply chain that is the envy of the rest of the world as a centre of excellence for offshore technologies. The supply chain generates tens of billions of pounds in domestic and export sales. It has a workforce with expertise that is unsurpassed globally, and whose skills will be critical in helping us unlock the remaining barrels on the UK Continental Shelf. With up to 20 billion barrels of oil and gas estimated still to recover, there is good opportunity ahead.”
The industry launched a number of initiatives in 2015 to improve efficiency, all of which are set to continue into 2016. These include an Industry Behaviours Charter and the Rapid Efficiency Exchange, an online portal where companies can share common problems and highlight successful solutions.
Another initiative has seen operating companies share inventories and there has been a study into compression systems. In addition, industry is targeting a 50% reduction in drilling costs to ensure the basin remains globally competitive.
Oil & Gas UK’s industry-lead Efficiency Task Force is leading a drive for greater co-operation across the sector.
But Oil & Gas UK says government and HM Treasury will also have an important role to play in delivering regulatory reform and with the Treasury’s Driving Investment plan.
"While we recognize the need to deliver a sustainable industry in the longer term, we also know it is key that work is done by all parties in the short term, to help us steer an effective path through the next couple of years," says the body.
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