This month saw a rather alarming heading making the front page of the Scotsman. The kind of headline that made me stop, back-track my steps, and read the article right then and there in the shop. The headline:
North Sea at 'crossroads' as drilling slumps to 50-year low.
Energy Stability
This is a hugely important story for each and every person living in the UK, as it casts significant worry over the energy stability of the nation going forward. Even with continuing development of renewable energy sources in the UK, we still rely heavily on gas for heating our homes. With only 50% of our gas supply being domestic (produced within UK waters), that means that we already require gas imports from other countries to cater for half of our demand needs. Continued decline of UK production will see increasing reliance on trade deals with other countries, and potentially a delay in supply when it is most needed. Just last year, the severe 'Beast from the East' winter storm saw the UK gas supply almost emptied, a trend that could become more regular in the future is domestic production continues to fall.
Exploration Low
The article outlines the current investment in the UK industry has plummeted to an all time low. This is despite rising oil prices since the 2014 crash.
"Just four exploration wells were started in the first eight months of the year. Although more wells are earmarked, exploration activity this year is expected to be the lowest since 1965"
Given that first exploration well was drilled at the end of 1964, this effectively means that this is the lowest rate of drilling in the UK waters since drilling began. Well 38/29-1 spudded in December 1964 and, although the well did not discover any hydrocarbons, it was closely followed by the first gas discovery in 1965. Eight wells spudded in 1965, ramping up to 27 the following year when the first North Sea gas arrived onshore.
Looking to the Future.
Although the news article headline is alarming, the lack of exploration activity does not necessarily mean a lack of oil and gas. There are significant volumes of discovered hydrocarbons sitting in the North Sea (named 'unsanctioned discoveries'). These accumulations are deemed to be uncommercial to produce, either because of small volumes or technical challenges. over 350 of these accumulations have been identified, with an estimated 3 billion barrels of oil equivalent in place. With advancements in technology, these could become financially viable resources in the future.
But, at the end of the day, companies must drill wells to find hydrocarbons. There needs to be a step change in thinking to encourage the leaders of companies to take the risk to drill exploration wells. Whilst much advancement has been made in the development and use of renewable energies in the UK in the last decade, gas has been seen as a low-emission replacement for coal generated energy, and therefore remains an important part of out energy usage in the UK. Without new discoveries, our reliance on alternative sources of energy and imports will be much higher in the coming years, leading to a chaotic, rather than smooth, energy transition.
Read more at: https://www.scotsman.com/news/politics/north-sea-at-crossroads-as-drilling-slumps-to-50-year-low-1-4797826total
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