North Sea crude production growth to halt after 2017

BOSTON -- In 2017, North Sea crude and condensate production will increase by roughly 50,000 bpd to an average of almost 2.9 MMbpd according to ESAI Energy’s newly published Europe Watch report.

Additional supply from new project start-ups as well as light maintenance schedules will counteract legacy declines at mature fields and boost overall output. However, with few new major projects slated to come online after 2017, production will begin to fall in 2018 by roughly 40,000 bpd.

In the years since the crude price drop, North Sea producers have slashed operating costs in order to sustain and expand output. By renegotiating service contracts and focusing on the most promising fields, companies have been able to bring on-line projects, sanctioned at higher crude prices, profitably.

Producers in the UK also received a small assist from the government in the form of reduction in the headline tax rate from between 50-65% to 40%. As a result of these cost adjustments, operating cash margins are higher, breakeven costs have fallen, and many producers have returned to profitability despite the historically low price environment. However, as ESAI Energy analyst Ian Page points out, “expanding production to offset decline will remain difficult and we expect total production to begin falling in 2018."