Investment bankers Simmons & Co. have analyzed North Sea production and have determined that it peaked in 2000 at the combined rate for UK and Norway of 5.9 million bopd. Simmons forecasts the onset of a decline in North Sea production, down to 5.7 million bopd in 2002 and 2003 and then more rapidly to 4.7 million bopd by 2005.
In the new study, Simmons believes that the business model for the North Sea will inevitably evolve along the lines of the Gulf of Mexico. Shrinking field sizes and higher depletion rates are less economically attractive to major E&P companies which must deliver large production growth to overcome their own depletion rates. Simmons expects the majors to de-emphasize the North Sea while independents will raise their profiles, especially in the UK.
Recent licensing rounds in the UK and Norway have seen an influx of independents who have also acquired producing properties on the UKCS. While the majors are likely to hold on to core fields, infrastructure and promising development opportunities, it is reasonable to expect they will divest themselves of other properties.
According to the Simmons analysis, the oil service industry and independents will benefit from the new ‘fractured’ client base.
The North Sea has changed. The “easy” production growth of the 1990s is over. The deepwater, Atlantic Margin, Norwegian Sea and Barents Sea regions offer opportunities for production growth, but the core continental shelf region is set to experience declining production. Independents will likely demand regulatory changes to lower costs of production in the new environment. Read the full report on www.simmonsco-intl.com.