The North Sea was thought to be the prime example of how the oil price slump hurt high-cost corners of the energy industry. Yet its crude output is defying the doomsayers.
After an increase last year, the region’s production will rise again in 2015 to almost 3 million barrels a day, the first consecutive annual gains in 15 years, the International Energy Agency said Wednesday. The extra supply is entering a global market already “awash” with competing grades of oil, it said.
The impact will be felt across the world because the North Sea - home of the Brent benchmark - plays an outsized role in the oil market. Even small gains in the region’s output can move prices significantly, according to consultant Energy Aspects Ltd. Production gains resulted in an “armada” of unsold North Sea cargoes in June and July, the IEA said.
“The North Sea has stemmed the decline seen over the past decade, ” Toril Bosoni, an oil-supply analyst at the IEA in Paris, said by phone Wednesday. “Investment in the North Sea clearly picked up after four years of triple-digit oil prices. Several new fields have started up since last year and we have seen fewer outages.”
Crude slid back into a bear market last month amid an enduring supply glut. Brent has averaged less than $50 a barrel in August, half the level of a year ago, and settled at $49.22 Thursday on the London-based ICE Futures Europe exchange.
Even as prices dropped, daily North Sea production climbed by 35, 000 barrels in 2014 and will gain another 65, 000 this year, according to the IEA. Those would be the first consecutive gains since 1999 and 2000, bucking a steady decline from a peak of 6.36 million barrels in 2000 as aging fields yield less crude and the industry deals with higher costs.
The increase in the region - which includes fields in waters off the U.K., Norway, the Netherlands, Denmark and Germany - comes partly from new resources such as BP Plc’s Kinnoull field, Statoil ASA’s Gullfaks South project and Golden Eagle, operated by Cnooc Ltd.’s Nexen unit, according to the IEA.