If Oil Prices Are Low, Why Is the UK Increasing Production?

For months, the world has been reeling in what’s described as one of the worst oil price crashes in history. This drastic price drop has seen oil and gas output drop by 50% over the past 15 years, with sources running low and investments failing to meet demand. One of the key contributing factors is a surplus of production. So why, in the wake of yet another recent price crash, is the UK increasing production for the first time in 15 years?

North Sea attracts new explorations

New explorations in the North Sea region have revived the industry, and led to an increase in oil production for the first time in over a decade. According to the latest government statistics, these new ventures have seen UK oil production rise by 8.6% compared to 2014’s figures.

Deirdre Michie, chief executive at Oil & Gas UK explains, “In February 2015 we predicted a marginal increase in production for 2015, but the industry-wide focus on improving production efficiency coupled with investments of more than £50bn over the last four years to bring new fields on stream across the last 12 months is paying off and yielding a better result.”

Short term relief for UK oil industry

The rise in UK continental shelf production was larger than expected, yet analysts admit that continuing the upwards curve in 2016 will be hard. With oil prices slumping to pre-financial crisis levels, the returns on resources simply aren’t worth the while for some companies.

Unfortunately, a rise in production doesn’t necessarily mean a positive outlook for the industry as a whole. “The fact is that the value of our product has more than halved,” says Michie. This has forced blue chip producers such as Shell, Centrica and BP to kill investments and cut thousands of jobs.

“Times are really tough for this industry and for the people working in it. We will continue to see job losses as we move into 2016 and we must be thoughtful and supportive of our colleagues and their families who are being made redundant or who are at risk of being made redundant,” she adds.

Production may be increasing, but that doesn’t’ mean overheads are any less painful. Want to know more about what expenses go hand in hand with the oil industry? ‘An Ionic GC Column for 3 Petroleum Related Applications’ looks at gas chromatography (GC), and how its used for a myriad of applications in the petroleum industry.