UK North Sea operators have shown impressive resilience in the face of lower oil prices, buoyed by efforts to increase efficiency and productivity, but the revival could be short-lived if market conditions don’t soon improve. Although output rose again this year and is likely to increase in 2017, few new projects are moving forward, exploration has virtually ceased and investment is falling off a cliff, signaling trouble ahead. UK output jumped by 10.4% to 1.65 million barrels of oil equivalent per day in 2015-the first increase since 2000-and is projected to rise by 3% this year, according to industry lobby group Oil & Gas UK (OGUK) (PIW Oct.3’16). Helping drive the turnaround, average unit operating costs have fallen by 45% to $16/boe this year from a peak of $29.30/boe in 2014. Yet the signs are ominous. While not unexpected, the UK offshore is expected to rack up a free cash-flow deficit this year-its fourth in a row-of ￡2.7 billion.
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