Oil output threatened by ageing platforms

Britain’s oil industry is facing the threat of a cascade of North Sea rig closures, unless ageing platforms can urgently source more gas to help squeeze out the remaining barrels.

The potential threat to oil revenues looms as Scotland prepares to vote in September’s independence referendum – a debate in which oil production forecasts have become a political football.

The affected Northern North Sea (NNS) is a very mature part of the basin where producers are trapped in a vicious circle of falling output, rising costs to patch up ageing platforms, and dwindling power supplies.

To lift more oil from these depleted reservoirs, producers need to inject vast quantities of water – a power intensive process that requires a reliable source of energy, known as fuel gas.

Some platforms are not able to generate enough of their own fuel so have to try and import the shortfall from neighbours, but the overall net position in a key part of the NNS will go negative as early as 2016. This could force the early abandonment of rigs, with the loss of critical platform hubs sounding the death knell for dependent fields.

As output has declined in the NNS, platforms have become increasingly dependent on each other for fuel gas supplies and to spread fixed costs. The leveraging effect of any one party withdrawing is getting bigger as margins are squeezed.