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33% Of North Sea Oil Is Now Too Expensive To Extract

The oil price collapse will result in one-third of the North Sea oil left untouched because it will be uneconomical to produce, a new study from the University of Aberdeen showed on Wednesday.

According to the study led by Economist Professor Alex Kemp and Linda Stephen from the University of Aberdeen, even if Brent Crude prices were to trade at $45 a barrel, as much as 28 percent of the oil left in the North Sea would not be economical to extract. At $25 a barrel oil, a total of 35 percent of available oil in the North Sea may not make it out of the ground.  

“The future of the UKCS (UK Continental Shelf) at the oil and gas prices employed in this study depends critically on technological innovations which can significantly enhance productivity,” the oil economists said in the study as carried by the BBC.

“At low prices, fields are quicker to reach the end of their economical lives,” Professor Kemp told Evening Express.

“Although that means decommissioning costs may be lower, we are still facing an extremely difficult period for the industry,” the economist noted.

Commenting on the study, the leading industry association of the UK offshore industry, OGUK, said via market intelligence manager Ross Dornan:

“We know that low oil and gas prices, along with the impact of Covid-19 on operations, have created a very uncertain outlook as this report points out.”

“Remaining as competitive as possible to attract investment, alongside innovative and flexible approaches and business models, will be required to ensure we can not only continue to meet as much of the UK’s energy needs from domestic oil and gas, but also prepare the UK to fully capitalise on net zero opportunities of the future,” Dornan added.

Last month, OGUK warned that up to 30,000 jobs could be lost in the UK North Sea oil and gas sector.

By Tsvetana Paraskova for Oilprice.com

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