March 26, 2018 / 10:04 AM / 25 days ago

UK North Sea oil output to resume decline after brief respite

* North Sea production has recovered slightly since 2015

* New fields, more drilling helped reverse declines

* Oil production peaked in 1999 at 2.6 million bpd

By Ron Bousso

LONDON, March 26 (Reuters) - The UK North Sea is set to resume a two-decade decline in oil production next year, snapping a brief period of growth since 2015, consultancy Bernstein said in a report on Monday.

Production in the North Sea, home to the Brent global crude benchmark, peaked in 1999 at 2.6 million barrels per day (bpd) and had steadily slipped until 2014, when it hit around 800,000 bpd. In the past four years, output has stabilised or even recovered.

The halt to the decline stemmed from the start-up of several new fields such as the BP-operated Quad 204 west of the Shetland Islands and Enquest’s Kraken field east of them.

The revival was due also to improved output from existing fields as operators slowed the natural decline of reservoirs by accelerating drilling around wells, a process known as infill drilling, and ran platforms better, Bernstein said.

Decline rates improved from around 18 percent in 2012 to 8 percent in 2016 and 5 percent in 2017, the report said. Output from fields naturally decreases as they age and their resources dwindle.

“The stability and even growth from 2015 to 2018 will prove temporary in nature for this 1 million bpd basin,” the report said.

Production from the UK North Sea, considered the world’s first deepwater oil basin, is expected to grow by 4 percent, or roughly 40,000 bpd, in 2018 before declining from 2019 to 2021.

Infill drilling sharply accelerated following a drop in rig rates in the wake of the 2014 oil price downturn. In 2016, 54 wells were completed, more than double the number in 2012.

At the same time, the production efficiency of wells and platforms increased to 73 percent in 2016 from 60 percent in 2012, accounting for a 200,000-bpd gain in output over the period, according to Bernstein.

The decline in output has had a profound impact on North Sea producers.

Nimble, often privately owned companies such as Siccar Point, Neptune and Chrysaor that specialise in extending the life of ageing fields are gradually replacing large producers such as Royal Dutch Shell and BP, which were among the first to develop the basin but see less opportunity there today.

Reporting by Ron Bousso

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