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“The North Sea’s woes are existential”
It has not been a good summer for the North Sea.
A new report from Oil and Gas UK has found that investment in the region is being “severely undermined” by low oil prices, which means whatever capital you put in you’re unlikely to ever see again as returns.
Brent has fallen from above $63 at the start of July to around $46 per barrel at the time of writing, due to persistent oversupply and growing concern about demand levels from China and other Asian economies.
And there’s little hope that Opec will reverse its stubbornly held refusal to lower its output to force prices up, not least because Opec members have suggested they won’t be willing to support prices unless Russia does the same.
But the North Sea’s woes are more existential than that. A second late summer report has questioned whether Brent should be held as a global oil benchmark at all.
The giant Brent field’s heyday in the 1970s has fallen away as reserves decline and some are wondering whether it should still be used as a mark against which two-thirds of the world’s oil trade is measured, or whether more productive North Sea fields should carry the mantle.
It could even be an Asian benchmark which takes Brent’s place beyond the medium term, given that the region is an increasingly important destination for volumes. Which is just as well. After all, the Statfjord, Flotta, or Johan Sverdrup crude price just doesn’t have quite the same ring.
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