UK oil and gas production is forecast to recover gradually over the next five years, following a major dip in 2011, as several recent large offshore projects come on stream, according to a survey by industry association Oil & Gas UK.
Production in 2012 is expected to rise slightly to 1.85 million b/d of oil equivalent from 1.8 million boe/d in 2011 with output reaching some 2 million boe/d in 2017, the Oil & Gas UK survey shows.
The production uptick will be short-lived, however, and it is primarily the result of investment in a small number of large field developments initiated over the last year, the industry association said.
Capital investment is expected to rise to a record GBP11.5 billion ($18.2 billion) in 2012, from GBP8.5 billion in 2011, according the survey, reflecting a new wave of spending helped by recent tax breaks on heavy oil and deepwater projects West of Shetlands.
Despite the investment in new production in 2011, output on a P50 basis through to 2020 remains some 188 million boe lower than forecast a year ago, Oil & Gas UK said.
Last week, UK government figures showed that the UK's imports of crude and natural gas liquids in 2011 exceeded domestic crude production for the first time since 1978 after field declines and outages saw output drop over 17% on the year.
Including a record 20% slump in gas production in 2011 due to weak demand and a warmer than average winter, total oil and gas output slumped 18% on the year. Over the previous five years, the UK's mature North Sea fields had seen decline rates average 6%.
In addition to weak demand for gas, Oil & Gas UK blamed last year's output slump on a large number of unplanned stoppages combined with the lowest ever volumes of new production coming on stream.
CALL FOR FISCAL STABILITY
UK oil production has fallen steadily since reaching a peak of 137.1 million mt in 1999 when the country's exports hit a high of 54.76 million mt.
The country became a net importer of crude oil on an annual basis in 2005 and a net importer of oil and products in the following year.
Despite a growing short-term production profile, the production outlook for the coming years remains "depressed", the industry body said, reiterating its call for fiscal stability in the wake of the UK government's surprise North Sea tax hike in early 2011.
"It would be a mistake to take the current major project activity as a sign of long-term confidence across the industry," Oil & Gas UK's chief executive Malcolm Webb said in a statement.
The UK's economically recoverable resources could be further increased if action were taken to address the 1.3 billion boe of resources which are "fiscally stranded" because of the impact of the tax increase, Oil & Gas UK said.
Oil production is set to increasingly outweigh gas output in the UK as producers favor oil projects due to oil's growing relative price differential over gas, according to the survey.
By 2017, production of oil and natural gas liquids is expected to rise to 66% of total output compared to a balance of oil to gas of 55-60% over the past decade, the association said.
