LONDON, Aug. 4 (UPI) — After several years of declines and escalating costs, a British energy report suggests oil and gas production from the North Sea is set for a rebound.
Industry body Oil & Gas U.K. said a report on the first half of the year production from offshore basins is on pace to increase.
“Recent provisional figures from the Department for Energy suggest that oil and gas production from the U.K. Continental Shelf over the first six months of this year could be 2.5 percent higher than the same period last year,” Oil & Gas U.K. Chief Executive Deirdre Michie said in a statement. “It’s still early days, but initial indications suggest that production could increase this year for the first time in 15 years.”
An early 2015 report from the industry body found the market situation to be “bleak,” but added the government was enacting measures to ensure a robust future.
A weak commodity market is starving energy companies of revenue needed to continue with robust spending programs in 2015. Despite the slump, the early 2015 survey found production should increase slightly to 1.43 million barrels of oil equivalent per day, provided there are no major disruptions.
A budget plan outlined in March by the government was designed to boost explorationfor new oil and gas reserves in British territorial waters. Tax incentives in the new package should help stimulate investor confidence in a North Sea oil and gas industry coping with the decline of older fields, officials said.
The British government last year said it was moving forward with recommendations from retired businessman Ian Wood, who found there may be an additional 4 billion barrels of oil equivalent available for recovery in the North Sea.
Operating expenses in the North Sea are nevertheless up 8 percent while revenues for oil companies working in the region are at their lowest levels since 1998. Combined, those elements translate to a negative cash flow for North Sea operators.
“Clearly the oil price, which has more than halved since this time last year, continues to really challenge the industry,” Michie said.