The oil and gas industry around the UK has been at the center of news as of late, particularly when a large oil find had recently been declared 60 miles west of Shetland, off the north coast of Scotland and was proudly described as the UK’s “largest undeveloped discovery”. Taken at face value, this particular find was one of the most exciting for an industry still reeling after the oil price collapse of the past few years. The discovery was made by Hurricane Energy, a specialist exploration firm, which announced that its Halifax well had found large amounts of oil. It said it had also successfully undertaken a production test in which oil flowed at an impressive rate. The find was also reported to may even be connected with a previous discovery nearby and could potentially become part of one large accumulation of nearly a billion untapped barrels.
However, now it has been discovered that as much as £330 billion ($426 billion) could be spent on oil and gas extraction in the North Sea by 2050, according to a recent study.
The brand new study conducted by Aberdeen University also stated that they resulted in raising forecasts for energy production in the region off Scotland’s coast, estimating that up to 17 billion barrels of oil equivalent could be extracted between 2018 and 2050. The study then applied organised financial simulations to create a realistic model for the oil industry over the next three decades that was based on previous statistics collected, assuming that the different market prices are set to justify different levels of extraction accordingly.
The study showed that at approximately $70 per barrel and 60 pence per therm, oil and gas recovery was projected to exceed an incredible 17 billion barrels of oil equivalent by 2050. However, researchers also wanted to note that cost inflation was a greater danger at this price and stated that it could also “endanger the economic viability of some projects.”
The researchers noted that at $70 per barrel, almost £330 billion ($426 billion) would be spent on extracting oil from offshore fields. At $60 a barrel, those extraction and operating costs lessened to £272 billion, generating a cumulative figure of production to approximately 2050 of 14.8 billion barrels. By 2014, the number estimated at around 40 billion barrels of oil had been extracted from the North Sea.
Ahead of U.K. Finance Minister Philip Hammond’s budget announcement, there had also been speculation that the industry may see a new inflation on taxes, although no such thing was confirmed. Energy spoke person for the Scottish National Party, Alan Brown, also stated that the party wanted a more stable fiscal regime for the oil and gas industry moving forward.
“These latest revisions to forecasts confirm the major economic potential that North Sea oil reserves has to offer, with an expected 4 billion barrels more than 2017 estimates,” said Alan Brown. “It’s more important than ever that the Tories at Westminster rule out any hikes in tax for the oil and gas sector and instead support the future of the industry with new incentives for exploration to provide a long-term boost to both production and revenues.” he later continued.
While oil is currently trading above $70 a barrel, with the ongoing pressure of investment banks and hedge funds, they predict that prices have already rallied too far too fast. Recently, global head of commodity strategy at RBC Capital Markets, Helima Croft told news media such as CNBC’s “Worldwide Exchange” that unlikely contenders like Nigeria and Libya could also potentially influence whether oil reaches $100 a barrel or not in the future.
The discovery from the research has naturally raised various social and political questions and concerns. Additionally, after the famous Brexit, the UK’s oil and gas became even more sought after, and raises the question of whether citizens really want the jobs, income and secure energy supply that comes from a thriving industry, or potentially whether they instead would prefer to highlight the global carbon budget and choose to leave oil under the sea. Either way, the oil and gas industry will now be growing in ways we could never have expected.