THE oil price plunge is likely to result in North Sea fields being decommissioned early as there is limited scope to achieve cost savings in the area experts have warned.

Oil and gas industry specialists at PwC said the North Sea could be hit hard by the fallout from the latest oil market turmoil following moves made by firms in response to the last one.

Momentous Opec Plus production deal fails to lighten gloom in North Sea

Operating costs were reduced by around 50 per cent in the area amid the downturn triggered by the oil price fall from 2014 to 2016.

“Delivering a similar scale of operating cost reduction in an industry that is much leaner is not possible. And in the UK North Sea this might translate into shorter field lives and accelerated decommissioning and shut-ins,” PwC will note in a forthcoming report.

This will highlight the potential impact of the fall in the oil price this year on the oil and gas supply chain in the UK.

The costs of the crude price plunge must be shared fairly

“Many oil services companies have yet to fully recover from the 2014 oil price crash and have been operating on wafer thin margins,” the report states.

The International Energy Agency yesterday said curbs on production that were agreed by major exporters at the weekend would not offset the record fall in demand resulting from the coronavirus pandemic.

However, it said the production cuts agreed by members of the Opec Plus grouping of exporters including Saudi Arabia and Russia represented a “solid start” to tackling the problem.

The IEA reckons the cuts have the potential to reverse the build-up in stocks as the year progresses. Demand is expected to increase as coronavirus-related restrictions on activity are eased.

200 North Sea jobs at risk as oil services firm plans deep cost cuts

But Brent crude traded down $2.08per barrel at $27.52/bbl yesterday afternoon amid concern about the outlook for demand. It sold for $52/bbl early last month before Saudi Arabia and Russia launched a price war after differing about how to respond to the impact of the coronavirus.

Brent crude fetched $70/bbl in January.

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