OIL & Gas UK appears confident the North Sea industry is successfully reinventing itself in response to the crude price plunge.
However some may fear the process will leave the industry in much reduced form compared with the one that went into the downturn that started in 2014.
The industry body’s confidence appears to owe much to the fact that $6 billion (£4.6bn) worth of deals were completed in the North Sea in the first half after years of relatively limited mergers and acquisitions activity.
The deals sent a clear signal some investors thought it was a good time to increase exposure to the North Sea. Private-equity backed Chrysaor saw enough potential in the area to spend $3bn on a package of assets that Shell decided were non-core.
The assumption is that buyers of such assets will invest more in them than the former owners planned to, providing a much-needed spur to activity in the process.
But with the outlook for crude prices remaining unclear in spite of the best efforts of Opec members that cannot be guaranteed.
Brent crude sold for around $53.30 per barrel yesterday when hopes Opec would extend production cuts again provided support. That compared with $56/bbl plus in April. The black stuff fetched $115/bbl in 2014.
It may be some time before firms that bought assets in the first half commit to supporting any new activity on them.
In the meantime Oil & Gas UK notes that companies will face continuing pressure to squeeze costs out of the supply chain, with worrying implications for jobs.
North Sea firms have cut production expenses by around a half since 2014. However, it still costs more to operate in the area than in comparable basins around the world.
Oil & Gas UK notes ownership changes have added fresh impetus to the cost cutting drive in the North Sea with what it calls instances of workforce contraction due to synergies made through M&A activity.
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