North Sea Drilling & Deals to Remain Lower: New Report

Posted by George Backwell
Wednesday, April 30, 2014
Offshore units: Photo courtesy of Rolls-Royce

Drilling and deal activity on the UK Continental Shelf (UKCS) will remain at ‘a steady low’ for at least the next year, suggests a new report from business advisory firm Deloitte.

Poor weather and high costs have already had an impact on the amount of exploration and appraisal (E&A) work conducted by operators in the region during the first quarter.
 
The report, which details activity across North West Europe over the first three months of 2014 and was compiled by Deloitte’s Petroleum Services Group (PSG), found a total of 12 E&A wells were drilled on the UK Continental Shelf (UKCS). Although that represents an increase of five wells compared with Q4 2013, it is a decrease of one well on the same period last year.
 
There were also fewer deals completed compared with the same period last year, with 10 reported this quarter compared with 19 a year ago. This is also eight deals fewer than in the final quarter of 2013. Farm-ins, where one company takes a stake in another company’s field, remained the most prevalent type of deal, making up 50% of the total for offshore UK.
 
Graham Sadler, managing director of Deloitte’s PSG, said the drop in deals could be due to a gap in price expectations between vendors and buyers, and explained that significant challenges remained in the region.
 
He said: “"It is very likely that what we’re seeing is a result of the continuing higher operating costs and the ongoing challenges of a mature region. These could be having a knock-on effect on deal flow, since sellers might be seeking a higher price than buyers may be willing to pay"
 
"“When profitable extraction is more challenging for operators, farm-ins are the most popular type of deal. Bringing another company in helps to spread risks and costs within the time frames required. Operators are definitely showing more caution, indicating, again, that incentives from Government may be the only way to make the economics more viable.”"
 
This caution is underlined by the fact that only two gas fields started producing this quarter and one condensate field was approved for development. All of these received the small field allowance.
 
The Government’s support of recommendations made in Sir Ian Wood’s report, ‘UKCS Maximising Recovery Review’, along with the fiscal review announced in Chancellor George Osborne’s Budget last month, are positive steps and may lead to measures being put in place to incentivise activity offshore.
 
However, while the recommendations of the Wood Review are good news for the industry, tax changes confirmed in last month’s Budget could lead to additional costs for North Sea operators.
 
The changes to the way bareboat chartering is taxed applies to companies operating on the UKCS leasing rigs and offshore accommodation. The measure will increase costs and lead to upward pressure on day rates at a time when operating costs are already at an all-time high.
 
Derek Henderson, office senior partner for Deloitte in Aberdeen, said the tax was a blow for industry, especially as there had been some evidence of a slight decline in rig rates during Q1 2014.
 
He said: "There are positive steps being taken to encourage more activity and investment in the North Sea over the longer term, not least the recommendations in Sir Ian Wood’s Review.
 
“The tax to bareboat chartering has caused some real concerns, however. While it doesn’t affect operators directly, many expect that the cost will be passed on to them and could discourage drilling.
 
“The sector is in for a long haul back to anything like the performance of the peak years and, while there are sound measures being brought in to encourage activity, we’ll need to see a concerted effort from Government and industry to restore confidence in the sector in the short term and to ensure maximum recovery from the UKCS in the long term.”"

The full report is available for purchase at: www.psg.deloitte.com/store

Source: Deloitte’s Petroleum Services Group (PSG)

Maritime Today


The Maritime Industry's original and most viewed E-News Service

Maritime Reporter April 2016 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

ABS’ Wiernicki Addresses SUNY Maritime Grads

ABS Chairman, President and CEO Christopher J. Wiernicki addresses SUNY Maritime College graduates, awarded honorary Doctor of Science   Christopher J. Wiernicki,

Moody's Dings Hurtigruten's Outlook Due to Newbuilds

Moody's Investors Service, (Moody's) issued a press release affirming the B2 corporate family rating (CFR), B2-PD probability of default rating, and the B2 senior

ShipDC Launches with New Leader at the Helm

Ship Data Center Co., Ltd., a wholly owned subsidiary set up by ClassNK, has officially commenced operations of its big data center, ShipDC, from April 2016. Taking

Offshore

BMT Delivers CFD Study for FPSO

BMT Fluid Mechanics (BMT), a subsidiary of BMT Group Ltd., completed a Computational Fluid Dynamics (CFD) study for an oil major operating offshore Nigeria. BMT

BSEE, USCG on Sharing Information, Jt Ops

Bureau of Safety and Environmental Enforcement (BSEE) Director Brian Salerno and U.S. Coast Guard Rear Admiral Paul Thomas participated in a luncheon panel discussion

MOL Launches Coastal LNG Transport in Indonesia

Mitsui O.S.K. Lines, Ltd. (MOL; President & CEO: Junichiro Ikeda) today teamed up with a local partner in Indonesia, PT Pelindo Energi Logistik (PEL; President

Energy

Evergreen Holding Group May Miss Bond Payment

Evergreen Holding Group, an unlisted company that specialises in building boats, issued a warning on Friday that it may have trouble making coupon and interest payments on a bond maturing on May 15.

BSEE, USCG on Sharing Information, Jt Ops

Bureau of Safety and Environmental Enforcement (BSEE) Director Brian Salerno and U.S. Coast Guard Rear Admiral Paul Thomas participated in a luncheon panel discussion

Gazprom Wins Green Development – Evolution Awards

Gazprom was announced the winner of the All-Russian Green Development – Evolution Awards 2016 in the Best Green Tech Solution category. The award was presented

Government Update

IBIA Develops Bunkering Procedure Guidelines

A set of Standard Operating Procedures (SOP) for surveyors has been developed by the International Bunker Industry Association (IBIA) to help the industry manage new regulations,

Strikes Cause Stoppage in Greek Ports

A 48-hour strike by the Seamen’s Union in Greece is expected to affect all domestic and local ferry routes as well as commercial vessels calling at Piraeus, Aspropyrgos,

Coast Guard, Homeland Security Open Joint R&D Facility

Coast Guard Research and Development Center along with DHS Science and Technology Directorate officially open a new Science and Technology Innovation Center   The

Consulting

EU Shipowners Want Progress at Alang Shipbreaking to Be Rewarded

Ship recycling practices in Alang, India, are gradually improving. The European Commission should acknowledge this positive development under the EU Ship Recycling Regulation.

Bureau Veritas Acquires TMC Marine

Bureau Veritas has acquired international consultancy TMC Marine Ltd.    TMC has provided pre- and post-casualty advice and support to the marine industry since 1979.

ICS Criticises 'Prestige’ Judgement by Spanish Court

At a meeting of the International Oil Pollution Compensation Funds (IOPCF) this week, the International Chamber of Shipping (ICS) has strongly criticised the judgement

Offshore Energy

BMT Delivers CFD Study for FPSO

BMT Fluid Mechanics (BMT), a subsidiary of BMT Group Ltd., completed a Computational Fluid Dynamics (CFD) study for an oil major operating offshore Nigeria. BMT

BSEE, USCG on Sharing Information, Jt Ops

Bureau of Safety and Environmental Enforcement (BSEE) Director Brian Salerno and U.S. Coast Guard Rear Admiral Paul Thomas participated in a luncheon panel discussion

MOL Launches Coastal LNG Transport in Indonesia

Mitsui O.S.K. Lines, Ltd. (MOL; President & CEO: Junichiro Ikeda) today teamed up with a local partner in Indonesia, PT Pelindo Energi Logistik (PEL; President

Underwater Engineering

US Aims to Recover El Faro VDR in Next Few Months

The U.S. National Transportation Safety Board hopes to recover the voyage data recorder from the cargo ship El Faro, which sank during a hurricane killing all 33 crew on board,

UK Ship Named for BBC Naturalist, but Boaty McBoatface Lives On

A new 200 million pound ($290 million) polar research ship is to be named after veteran BBC naturalist David Attenborough but the government promised on Friday that "Boaty McBoatface",

BAE Systems Bags USN Award for Submarine Propulsors

BAE Systems has received a $72 million contract from the U.S. Navy to produce and deliver propulsor systems for Block IV Virginia-class (SSN 774) submarines. The

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Naval Architecture Pipelines Pod Propulsion Port Authority Salvage Ship Electronics Sonar Winch
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.1412 sec (7 req/sec)