Oil and gas production in UK waters ‘on the rise’

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Oil and gas production in UK waters is set to rise for the first time in 15 years this year.

Industry body Oil and Gas UK said provisional figures showed production for the first six months of the year could be up 2.5% on the same period last year.

The Golden Eagle field, which started producing in November, is thought to have played a part.

Increased efficiency from existing assets is also being highlighted.

Deirdre Michie, chief executive of Oil and Gas UK, said: “It’s still early days, but initial indications suggest that production could increase this year for the first time in 15 years.

“Clearly the oil price – which has more than halved since this time last year – continues to really challenge the industry.

“However, this positive news can indeed be attributed to the effort and investment industry has put into improving the integrity and performance of assets.”

Analysis by Douglas Fraser, BBC Scotland business and economy editor

The rise in oil and gas output – of about 40,000 barrels per day – is not, perhaps, what you would expect when the price has been falling and the industry has been slashing at costs and investment.

It reflects less downtime for maintenance, and the industry points to its efficiency measures working.

But it mainly reflects previous years of investment. More than £30bn in the past few years has secured a second wind for the North Sea and new projects west of Shetland.

And with output at around two-thirds of its peak level at the turn of the century, only one field can make a big difference. The Golden Eagle field, 40 miles north-east of Aberdeen and operated by Chinese-owned Nexen, can pump up to 70,000 barrels per day and only started production last November.

It has been forecast that output will remain at a slightly higher level for the rest of this decade, before returning to long-term decline as fields deplete.

Does this mean a rise in offshore tax revenue? No. With 3% more oil and 2.5% more gas, revenue may be slightly more than the low forecasts, but as tax is based on profit rather than production, and taxable profits are reduced by the low oil price and by investment allowances, the tax take is still going to be a long way down on recent years.

The global downturn in oil industry investment this year can be expected to have an effect later this decade. Without replacement supplies for depleting fields, we could see a constraint on supply, which can be expected lead to more price volatility to the upside.

The original source for this post can be found here.

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Here Are The World’s Five Most Important Oil Fields

1.  Ghawar (Saudi Arabia) The legendary Ghawar field has been churning out oil since the early 1950s, allowing Saudi Arabia to claim the mantle as the world’s largest oil producer and the only country with sufficient spare capacity to act as a swing producer. Holding an estimated 70 billion barrels of remaining reserves, Ghawar alone has more oil reserves than all but seven other countries, according to the Energy Information Administration. Some oil analysts believe that Ghawar passed its peak perhaps a decade ago, but Saudi Arabia’s infamous lack of transparency keeps everyone guessing. Nevertheless, it remains the world’s largest oil field, both in terms of reserves and production. It continues to produce 5 million barrels per day (bpd).

2.  Burgan (Kuwait) Just behind Ghawar is another massive oil field located in the Middle East. The Burgan field was originally discovered in 1938, but production didn’t begin until a decade later. The field holds an estimated 66 to 72 billion barrels of reserves, which accounts for more than half of Kuwait’s total, and it produces between 1.1 and 1.3 million bpd.

3.  Safaniya (Saudi Arabia) The Safaniya field is the world’s largest offshore oil field. Located in the Persian Gulf, the Safaniya field is thought to hold more than 50 billion barrels of oil. It is Saudi Arabia’s second largest producing field behind Ghawar, churning out 1.5 million bpd. Like Saudi Arabia’s other fields, Safaniya is very mature as it has been producing for nearly 60 years, but Saudi Aramco is working hard to extend its operating life.

4.  Rumaila (Iraq) Iraq’s largest oil field is the Rumaila, which holds an estimated 17.8 billion barrels of oil. Located in southern Iraq, Rumaila was highly sought after when the Iraqi government put blocks up for bid in 2009. BP and the China National Petroleum Corporation (CNPC) are working together to develop the giant field along with Iraq’s state-owned South Oil Company. The field now produces around 1.5 million bpd, but its operators have plans to boost that production to 2.85 million bpd over the next couple of years.

5.  West Qurna-2 (Iraq) Also located in southern Iraq, the West Qurna-2 field is Iraq’s second largest, holding nearly 13 billion barrels of oil reserves. The West Qurna field was divided in two and auctioned off to international oil companies. Russia’s Lukoil took control of West Qurna-2 and successfully began production earlier this year at an initial 120,000 bpd. Lukoil plans on lifting production to 1.2 million bpd by the end of 2017. The neighboring West Qurna-1 field – operated by a partnership of ExxonMobil, BP, Eni SpA, and PetroChina – holds 8.6 billion barrels of oil reserves. They hope to increase production from 300,000 bpd to more than 2.3 million bpd over the next half-decade.

It’s clear that the Middle East is still the center of the universe when it comes to oil. Despite their age, these supergiants remain the oil fields of tomorrow. And as the tight oil revolution in the U.S. plays out, these fields will remain, and the world will continue to depend heavily on the fortunes of a few countries in the Middle East.

The original source for this post can be found here.