Recently published research from Business Monitor International, "United Kingdom Oil & Gas Report Q2 2016", is now available at Fast Market Research

[ClickPress, Sun Apr 03 2016] While we see a provisional uptick in oil and gas production in the UK from 2015 onwards based on projects in the pipeline, the long-term trend remains one of stagnation given falling volumes from mature fields, a lack of significant new discoveries, falling oil prices and increasing exploration, production and operational costs in the region at a time when oil companies are seeking Capex cuts. While shale gas presents upside risk to gas production, this will not come online before the early 2020s at the earliest. Significant fiscal incentives put in place following the ongoing fiscal review provide some upside risk to our oil and gas production outlook past 2018/2019 . However, further reforms and higher sustained oil prices will be necessary to realise this upside risk.

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The main trends and developments we highlight in the UK oil and gas sector are :


We retain our bearish oil and gas exploration forecasts this quarter, with 2016 shaping up to be potentially weaker then the woeful performance of 2015. Low oil prices, maturing fields and high operating costs make the UK North Sea region a relatively unattractive area for exploration. This will mostly endure over the coming years, despite the recent fiscal and development incentives enacted in early 2015.

The British parliament passed regulations permitting the drilling underneath protected area that include national parks, Areas of Outstanding National Beauty (AONB), the Norfolk and Suffolk Broads and World Heritage Sites. Companies will be allowed dill wellheads outside of protected areas and drill horizontally beneath the parks at a minimum depth of 1,200m.

Upstream And Downstream Oil & Gas

Oil production in the United Kingdom will average over 1mn b/d in 2016, which is the first time since 2011, as the reversed decline in production that started in 2015 continues with major projects such as Quad 2014 bolstering output. Despite production expected to increase until 2019 thanks to substantial new fields coming online, the overall outlook for the UK's oil production is bleak, as high operating costs and a lack of high-quality opportunities deter further investment.

In January 2016, Premier Oil acquired E.ON's North Sea assets, increasing Premier's stake in the Huntingdon field from 25% to 100%, in addition to acquired interests in the Elgin-Franklin (5.2%) and Babbage fields (4.7%) and a 47% stake in the Tolmount discovery. We expect further consolidation in the North Sea across 2016, as companies look to make cost saving synergies to survive the low oil prices ( see 'Premier Deal An Industry Bellwether' , Jan uary 15).

Total announced first gas from its flagship Laggan-Tormore project in February 2016. The USD3.5bn project will produce 5bcm of natural gas and supports our positive growth outlook for the UK's gas production over the next four years.

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