Follow us.

North Sea Oil and Gas on the Road to Recovery

When prices slumped in 2014, it looked like the North Sea was on its way out as an oil and gas-commercially attractive producing basin, hit by  excess global production and high costs.

But rumours of its demise were exaggerated, and the industry today is looking healthier than it has in years. Costs have been slashed – the Financial Times recently reported BP CEO Bob Dudley saying that its costs in the region had halved since 2014 to less than $15 a barrel and it hoped to get down to $12 a barrel by 2020, while Shell said that falling costs meant that some projects that had been losing money at $100 a barrel were now profitable at half that price.

Oil and Gas UK says that, helped by its Efficiency Task Force, “companies have delivered unit operating cost improvements greater than in any other basin in the world since 2014”. Although the maturity and complexity of the UK Continental Shelf (UKCS) means it remains an expensive basin in which to operate, it adds that “this is still a basin worth investing in, with exciting hydrocarbon opportunities, established infrastructure, access to a world-class supply chain, a highly skilled workforce, as well as a globally competitive fiscal regime”.

And after 15 years of falling production, output has been rising since 2015 as a number of new projects approved during the high-price era came on stream. These should keep output on the up until the end of the decade, but new discoveries will be needed to maintain progress during the 2020s.

Investor Confidence Returns.

While this seemed an unlikely prospect a few years ago, now there is every reason to suppose that it will come to pass. Investor confidence is returning to the sector as a whole, and to UK oil and gas in particular. Almost $6 billion was invested in assets and companies focused on the UK Continental Shelf in the first half of 2017, and the trend continued into the second half as Total bought Denmark’s Maersk Oil for $7.5 billion.

The number of jobs the industry supports has fallen by a third since its 2014 peak, but it still employs 300,000 people and there is evidence that the rate of job loss is slowing – 13,000 jobs are predicted to be lost in 2017, down from 60,000 the year before. At the same time, production efficiency has risen for the fourth year in a row, hitting 73%.

The Oil and Gas Authority (OGA) reports that 6.3bn boe are in production or under development and up to 20bn boe remain to be exploited. Key to the industry’s ability to do so will be a continued focus on driving down costs and it will also need to leverage a range of technological innovations, from artificial intelligence to drones to jack-up barges.

The OGA’s Vision 2035 and Maximising Economic Recovery (MER) strategies set out a path for the industry’s future prosperity, with the aim of increasing gross revenues from UKCS oil and gas production from a currently predicted £281bn in 2035 to £418bn, with the UK supply chain increasing turnover to £496bn  from today’s forecast of £348bn thanks to increased exports.

With prices set to remain under pressure from increased production in the US shale sector and competition from renewable energy and electric vehicles, the oil services industry will have a key role to play in this, and technology will be crucial to continuing improvements.

Innovation Drives Recovery.

The Oil and Gas Technology Centre (OGTC) is helping to encourage innovation in areas such as asset integrity, small pools, decommissioning, digital transformation and well construction.

“There is clearly an urgent need for digital transformation in the oil and gas industry,” says the OGTC. “Decommissioning is upon us in a big way. And we can’t wait for the oil price to recover. We need to deploy the most advanced and most integrated digital solutions now.

“We are faced with three major challenges,” the organisation adds, “huge volumes of raw and processed data, mostly in siloed stores; growing volumes of real-time operational data, and integration and display at scale to create actionable opportunities”.

Oil and gas companies have long used digital technologies to model exploration and production assets, the International Energy Agency said in a recent report, Digitalization and Energy.

Widespread use of digital technologies could cut production costs by 10%-20%, including through advanced processing of seismic data, the use of sensors, and enhanced reservoir modelling, the report adds. Technically recoverable oil and gas resources could be boosted by around 5% globally.

The IEA highlights other areas where digital technologies will have a big impact, including using big data to unlock more volumes of oil or natural gas or make production processes more efficient, dynamic steering of drill bits from remote operations centres, or using highly sophisticated sensors to optimise where wellbores should be placed to maximise oil and gas recovery.

In future, sensors will measure environmental performance, such as the efficiency or emissions intensity of operations and drilling rigs will be fully automated. Robots will inspect and repair subsea infrastructure and monitor transmission pipelines and tanks, while drones will inspect pipelines and hard-to-reach equipment such as flare stacks and remote, unmanned offshore facilities. This will improve safety, cut labour costs and make equipment more reliable. Because data will be processed more quickly and accurately, companies will be able to make decisions more quickly and get projects up and running faster.

Further out, artificial intelligence (AI) will “analyse well performance, troubleshoot underperforming fields, suggest corrective actions and even deploy robots to carry out tasks”.

The Benefits of Barges.

In a mature basin like the North Sea, there is a need for increased well intervention and there are technological advances here as well. One of these will be the increased use of jack-up barges instead of drilling rigs. Jack-up barges, or liftboats, are cheaper, more flexible and safer than fixed structures. They don’t need to be towed into position by tugs and they can be used for everything from field life extension projects to rig-less well intervention & production enhancement, and plug and abandonment.

Decommissioning is going to become increasingly important in the North Sea as older wells come to the end of their lives. Over the next decade, 1,400 wells are forecast to be abandoned on the UKCS, at a cost of around £7bn.

Another key driver of the North Sea economy will be the installation of hundreds more offshore wind, wave and tidal turbines, jack-ups and liftboats can play a vital role here as well. Indeed, this is an area of significant diversification opportunity for the wider industry.

Looking forward, the offshore industry in the North Sea will look very different than it did in the past, but if the sector can make its cost cuts stick and leverage technological advances effectively, it can be the most innovative basin in the world.

Attollo Offshore is at the forefront of these innovations. Our assets, which include propelled and non-propelled accommodation and well service jack ups for field life extension projects, rig-less well intervention and production enhancement, plug and abandonment, decommissioning and offshore wind projects, play a key part in this cost reduction drive.


For more information, contact:


Share this insight