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Strong prospects for the North Sea hailed

STRONG prospects for the North Sea are highlighted in a major report from Scottish Enterprise which identifies 86 new fields on the UK Continental Shelf that are under development or are expected to see work begin before 2016.

RIGGED FOR SUCCESS: A Scottish Enterprise report has identified 86 new oil fields on the UK Continental Shelf.
RIGGED FOR SUCCESS: A Scottish Enterprise report has identified 86 new oil fields on the UK Continental Shelf.

The economic development agency's Spends & Trends document is the latest in a series of reports to highlight the future potential of the North Sea, and plans for increased investment in coming years, despite the ongoing sharp decline in overall oil and gas production in the territory.

It also underlines the part that $100-a-barrel plus oil prices are playing in ensuring the mature province remains attractive to industry players.

Scottish Energy Minister Fergus Ewing said: "I warmly welcome this report, which clearly demonstrates the vast potential of the oil and gas sector in Scotland."

First Minister Alex Salmond has been hammering home the importance of the oil and gas sector to the Scottish economy in the run-up to the referendum on independence in 2014.

Mr Salmond has talked about as much as £1.5 trillion of oil remaining in the North Sea.

Among the 86 new fields highlighted by Scottish Enterprise are the Laggan and Tormore gas and condensate fields in the West of Shetland area, the subjects of a planned £2.5 billion development by French group Total and its partners.

The report identifies 34 new fields already under development, and a further 52 viewed as "probable developments" before 2016.

Among these 52 are fields for which development plans have been submitted to the Department of Energy and Climate Change but have not yet been approved.

Scottish Enterprise notes, in addition to these fresh prospects, major new investments are under way on 15 existing fields, including Clair, Forties and Schiehallion.

The Spends & Trends report also highlights industry expectations that there will be a total of nearly £44bn of capital expenditure on UK Continental Shelf (UKCS) projects over the five years from 2012 to 2016. This would represent a significant rise from £29.5bn in the preceding five years.

Summarising the findings of the Spends & Trends report, Scottish Enterprise says: "The UKCS is now a very mature oil and gas province, having produced for over 30 years.

"Although oil and gas output has declined during the last few years, the remaining recoverable reserves should ensure production for another 20 years. The expenditure forecasts show that there will be a surprisingly high level of activity over the next few years, with a number of major field developments under way or planned, notably in the West of Shetland area."

It adds: "One of the main reasons for the increase in development activity is obviously high oil prices, with Brent crude trading at over $100 per barrel."

Scottish Enterprise also cites "significant opportunities" for new contracts for the oil and gas sector supply chain.

David Rennie, director of oil and gas at Scottish Enterprise, said: "We know that the remaining recoverable resources on the UK Continental Shelf should ensure production for decades to come and the high level of activity, as set out in this report, will create significant opportunities for companies in the sector."

Scottish Enterprise cites forecasts that overall expenditure on the UKCS over the five years from 2012 to 2016 will exceed £90bn, with an annual average of £18bn. The near-£44bn of capital expenditure is 49% of the projected total spend over these five years. Operating spend is forecast to exceed £36bn.

Exploration expenditure is forecast to be £6.8bn. The annual number of exploration wells is, however, expected to fall from 56 in 2012 to 28 in 2016. Decommissioning expenditure is forecast to be £3.7bn over the five years.

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