Recovery of U.K. Oil & Gas Sector 'Dashed'

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Written by Martin Lynch, European News Editor for Industrial Info (Galway, Ireland)--A predicted recovery in fortunes for the troubled U.K. oil and gas sector have been dashed by what has been called a 'jaw-dropping' cut in estimates for the Lancaster field.

Hurricane Energy last month slashed its estimates for the highly promising Lancaster field, located in the West of Shetland area north of Scotland, from 500 million barrels estimated in 2017 to 58 million. According to the energy consultancy firm Rystad Energy, the "jaw-dropping downgrade of Hurricane Energy's Lancaster field revealed that the reservoir is more complex than previously thought..and is a major blow to the outlook for the U.K.'s future petroleum production, as fractured basement resources were estimated to account for nearly one-fifth of the future oil and gas output from the United Kingdom Continental Shelf (UKCS)".

It added: "Promising exploration results by Hurricane Energy in fractured basement reservoirs, previously untapped in the U.K., were until earlier this year expected to revive the country's output to 2.1 million barrels of oil equivalent per day (BOE/d) by 2035, according to Rystad Energy's estimates. Now those hopes have been dashed." As a result, the company has revised downwards its production forecast for the UKCS, showing production will never again exceed the threshold of 2 million BOE/d--last reached in 2010-- but will instead reach a maximum of 1.7 million BOE/d in 2035 before dwindling to nearly nothing by the middle of the century. UKCS production stood at 1.65 million BOE/d last year and is set to fall to 1.59 million BOE/d in 2020.

Production on the UKCS has dropped steadily from a peak at 4.3 million BOE/d in 1999 and never exceeding 2 million BOE/d after 2010. Rystad said that "promising exploration results by Hurricane Energy in fractured basement reservoirs, previously untapped in the UK, were until earlier this year expected to revive the country's output to 2.1 million BOE/d by 2035."

"The entire UKCS long-term production forecast has been impacted quite significantly," explained Olga Savenkova, upstream analyst at Rystad Energy. "The main takeaway here is that we may never again see any significant production upsurge in UKCS production. A possible game-changer could now only be a development of technical skills for producing from fractured basement reservoirs to increase the recovery factor."

Lancaster became the U.K.'s first fractured basement field in 2015 and is located on the Rona Ridge in the West of Shetland area. The first phase of development of the Rona Ridge assets, the Lancaster early production system (EPS), was brought on stream in 2019. Rystad said that the production data from the Lancaster EPS "didn't confirm original expectations on reservoir properties." The downgrade has slashed Hurricane's estimated resources by nine-tenths and triggered the stock to plummet.

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