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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Tomas who wrote (36720)2/4/1999 9:21:00 AM
From: Tomas  Read Replies (1) of 95453
 
Financial Times, February 4: Sharp rise seen in North Sea output
By Robert Corzine

Oil output from the North Sea is expected to grow strongly this year in spite of low crude prices, according to a new forecast by Wood Mackenzie, the Edinburgh-based industry consultants.

Total North Sea production this year is expected to average 6.81m barrels a day, a 13 per cent increase on the 6.02m b/d average for 1998. UK output is expected to rise by 14 per cent to a record 2.99m b/d, including 100,000 b/d from onshore fields.

Wood Mackenzie says upstream revenues from most UK and Norwegian fields "still exceed the marginal cost of production even at $10 a barrel". It said operators were keen to maximise output to boost cash flows, and doubts whether any North Sea fields will be shut down in the short term.

The slump in oil prices has caused some high cost production to be shut-in, especially in the onshore US, where the closure of low volume "stripper" wells is straightforward.

But the closure of offshore platforms would be complicated and costly. In addition, many North Sea operators have slashed operating costs in recent years. Shell, one of the biggest North Sea operators, says its operating costs in the UK are less than £2.50 ($4.12) a barrel. That is three times less than a 1990 estimate of what they would be for this period.

The Wood Mackenzie study suggests that much of this year's projected production growth will come from fields that have come onstream since 1996 and that are approaching full or plateau production.

A separate Wood Mackenzie study shows that oil demand in western Europe is likely to remain flat to 2005, with average annual growth rates of 0.6 per cent.
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