First Break - Volume 17, Issue 11, 1999

Oil production from the UK sector is set to peak next year, but the new millennium does not appear to hold out a glowing prospect for exploration or production. Andrew McBarnet reports on a Wood Mackenzie prediction and other pointers to future UK offshore operations. There was a note of urgency about the announcements at this year's Offshore Europe event in Aberdeen made by the new UK ministerial team of Stephen Byers, Secretary of State for Trade and Industry, and Helen Liddell, Minister with responsibility for energy matters including North Sea oil and gas. They made it clear that they were putting their weight behind a raft of proposals from the Oil and Gas Industry Task Force aimed at maintaining the UK oil industry as a major force. But, reading between the lines of a recent report by oil analyst Wood Mackenzie and other clues, any measures will struggle to combat a host of factors conspiring to turn UK offshore into something of a backwater in the years to come. There are already some ominous indicators out there. For example, exploration and appraisal (E & A) activity has long been a benchmark for judging the health and prosperity of the North Sea upstream sector. In 1990 there were some 200 E & A wells completed. Since that peak year the numbers have declined each year dropping to 58 in 1998 and expected to fall even further to between 30 and 40 wells in 1999. This will be the lowest level of activity witnessed in 30†years, and how long has it been since there were only two drilling rigs drilling E & A wells off the UK in the month of August as happened this year?

There is a hint of recovery for the upstream oil and gas industry, but the geophysical services market may experience a further weakening before recovery. That's the mixed message from Oilfield Market Report - 1999, an annual assessment from market analysts Spears & Associates, based in Tulsa, USA. Oil and gas companies are said to be poised to increase their E & P budgets in the light of the recent recovery in commodity prices. The report suggests that spending will exceed $67 billion in 2000 for 35 market segments in the drilling and production sector of the worldwide petroleum industry. The US and Canada are expected to see drilling activity up by 20% to 35% spurred by a strong demand for natural gas. Outside North America drilling activity is only expected to increase by 6%, according to the report. It goes on to say that improved oil prices have brought some deferred international oilfield developments back into the frame, but suggests that major oil companies are unlikely to undertake ambitious spending programmes while an estimated six million barrels per day of shut-in production continues to threaten the longer term price stability of oil. In view of its forecast, Spears & Associates indicates that the equipment used in the drilling and completion process such as bits, mud, rig time, logs and the like will see an increase in demand of more than 15%. More modest increases are expected in those market segments linked to the maintenance of existing wells.

Current positioning accuracy is not a limiting factor for the resolution of current seismic data; correlated errors are systematic and are accommodated by the stacking velocity.