Oil and Gas UK (OGUK)’s latest report on activity levels in the North Sea is grim reading in places but there are also some positives.
Drawing from recent Department for Energy and Climate Change figures, it says production fell by 8% during 2013 but the average daily output of 1.43million barrels of oil equivalent (boe) was better than expected.
It was also a big improvement on the average yearly decline of 15% seen between 2010 and 2012.
While production over the past three years has declined by 38%, a combination of new start-ups and fields coming back on stream is expected to result in an increase this year and an average daily figure of 1.7million boe by 2018.
In addition, the report highlights the positive effect tax allowances are having in driving investment.
It says more than half of all capital expenditure in 2013 was “in some way incentivised” by new field allowances which have boosted investment in projects likely to be unattractive at prevailing fiscal and market conditions.
OGUK also says the fiscal climate has had a vital role to play in boosting recovery from existing fields through better use of enhanced oil recovery techniques and by increasing the scope of the brownfield allowance.
OGUK economic and commercial director Mike Tholen said the industry still had a “solid base to work from” and there was a lot of pent-up demand for exploration wells.
He added: “More positive developments in the past few years are working their way slowly but inexorably through the system.”
Recent investment would convert into new production but the industry could be doing better, he said, adding: “We have to find ways to access rigs and finance.”
OGUK blames problems securing rigs and finance for rising operating costs, which accounted for a large chunk of the near £26million total expenditure by the North Sea industry last year.
The trade body says operators plan to drill about 25 exploration and 11 appraisal wells during 2014. This compares with 15 exploration and 29 appraisal wells last year.