UK Oil, Gas Output Set for Longest Expansion

UK oil and gas production will continue to grow through 2018, putting it on course for the longest expansion in almost two decades, amid project startups and productivity gains, an industry lobby said.

“Production has now been rising since 2015, bucking a 15-year trend of decline, and should continue to rise over the next two years,” Oil & Gas UK said in a statement on Tuesday. Output in the UK Continental Shelf rose to 1.73 million barrels of oil equivalent a day last year and will peak at between 1.8 million and 1.9 million barrels in 2018, the group said, Bloomberg reported.

New developments as well as productivity gains are behind the increase after output in the basin peaked about 15 years ago, the lobby said. The slump in oil prices has forced the industry to become leaner, with average operating costs falling by almost half to about $15.30 a barrel in the past two years.

EnQuest Plc’s Kraken project is among the project start-ups in the UK North Sea, with first oil due in the second quarter, the company said last month.

Oil & Gas UK expects investment to continue to drop in the basin, with spending forecast to fall 3% to $20.84 billion this year from 2016. Still, there are signs of renewed mergers and acquisitions activity in the North Sea, the group said. In January, Royal Dutch Shell Plc sold North Sea assets to Chrysaor Holdings Ltd., a private-equity backed exploration and production company, for up to $3.8 billion.

“Confidence is slowly returning to the basin,” Deirdre Michie, Oil & Gas UK chief executive officer, said in a statement. “The bottom of the cycle may have been reached.”