UK North Sea oil companies can’t afford more drilling

UK North Sea oil companies cannot afford to increase oil and gas extraction from the North Sea area, despite an increase in known oil reserves, according to a new report by industry body Oil & Gas UK shows that there are more projects under consideration than in 2009.

However, difficulties raising finance and the fact that the easiest and therefore, the cheapest oil reserves to extract have already been exploited means fewer projects are actually being developed. This will lead to a fall in the UK’s domestic oil production and increase the need for imports.

There are 11bn barrels of oil and gas in existing projects, up 15pc from the previous year, however, companies will need to raise £60bn of capital expenditure to extract this oil. UK production fell by 6pc, in line with steadily declining output over the last few years.

Companies extracted 2.48m barrels of oil and gas a day, which reflects the twenty percent drop in capital expenditure since 2006. It is likely that output could ease further to 2.35m barrels of oil equivalent per day in 2010.

Tags:  drilling, gas, north, oil, oil companies, reserves, sea, UK