Oil price fall to impact Europe’s development spending, survey predicts

Offshore staff

EDINBURGH, UK – Wood Mackenzie has issued an overview of the most significant events that impacted the oil and gas sector last year in Europe (excluding the UK and Norway).

James Webb, manager for Continental & Mediterranean Europe upstream research, said: “The biggest story of 2014 by far, was the collapse of Brent oil price from over $100/bbl in August to under $60 in December.

“Looking ahead to 2015, upstream activity will undoubtedly be influenced by oil prices, and we expect a direct impact on exploration and development budgets – with discretionary spend most at risk. However, with several licensing rounds and high-profile exploration wells expected, it is likely to be another exciting year for the region.”

The survey found that out of the $6.9 billion spent on development across the region last year, the Danish North Sea accounted for the highest percentage due mainly to expenditure on DONG’s Hejre and Hess’ South Arne Phase III projects. Sixteen new fields came onstream throughout the region covered in the report. However, development spending is set to drop markedly this year in response to the drop in oil price, with an estimated expenditure of $5.8 billion.

Last year the region surveyed produced almost 3 MMboe/d, and Wood Mackenzie expects annual production to remain at more than 1 Bbbl until the end of 2017. Although gas production declined 10% last year from the level in 2013, due to lower production caps at the giant onshore Groningen gas field in the Netherlands, the impact should be offset by first volumes from Shell’s Corrib project offshore western Ireland which is due to come onstream.

Last year the analysts counted 93 exploration and appraisal wells throughout the region, with the highest level of activity (28 wells) in the Netherlands. Exploration activity in this country should continue to recover over the next few years.

Regional hotspots likely to emerge with potentially high impact exploration include the Black Sea and the Eastern Mediterranean.

Last year 85 licenses were awarded across the region. Although this was down on previous years, substantial frontier acreage opened up following the launch of three offshore licensing rounds in Croatia, Denmark, and Greece. Additionally, Montenegro closed its first offshore licensing round last year.

Details of Ireland’s 2015 Atlantic Margin Oil and Gas Exploration Licensing Round are also imminent, with a closing date of September 2015.

01/28/2015

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