Drilling, deal-making and new field start-ups on the UK Continental Shelf all dropped last year but activity could spike this year on the back of low oil prices.
New figures contained within Deloitte’s Petroleum Services Group’s latest North West Europe Review show the number of new wells drilled dropped from 50 in 2013 to 40 last year although the figure was in line with expectations.
The number of deals done fell dramatically from 63 to just 23 and field start-ups more than halved, just six coming on stream, compared with 13 the year before.
The figures cover the period in which the oil price fell dramatically from north of $100 per barrel to around $50 per barrel. It has continued to fall and was trading at around $46 per barrel yesterday.
Deloitte said, however, that a continuing low-price environment could lead to more deals in the North Sea in the months ahead.
“Last year saw a reduction in the number of deals taking place in the North Sea, despite a large number of assets being available on the market,” said Derek Henderson, Deloitte’s Aberdeen-based senior partner.
“Price pressure and access to finance were issues for the most likely buyers smaller companies with limited budgets creating a price differential in the market and stalling deal activity.
“While it is not the only consideration, it is likely that if the oil price remains low, assets will become more affordable to some of the region’s more cash-rich players who may be looking to invest in the UK basin.
“As a result, we could see more transactions in 2015 as some businesses look to divest and focus on other areas.”
Deloitte said it was clear the UKCS was in a transitionary period, with a new industry regulator, the Oil and Gas Authority, established and calls for action on tax reliefs to stimulate investment and exploration.
“Over the last 12 months, both industry and Government have recognised the need for change on the UKCS,” said Graham Sadler, managing director of Deloitte PSG.
“We have started to see some positive steps taken in that direction, with the recommendations made in the Wood Review and tax changes.
“We continue to see steady but low levels of drilling and hope this will increase.”