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UK Oil Production Lowest For 28 Years
Posted by Chris Vernon on November 5, 2006 - 11:34am in The Oil Drum: Europe
Topic: Supply/Production
Tags: imports, north sea, oil, united kingdom [list all tags]
The key quote is:
Oil production in the period June 2006 to August 2006 was 12.1 per cent lower than a year ago.This isn't good news and perhaps we are becoming weary of such announcements however there is a little more we can say about these recent numbers...
More than 900 deep-sea divers working in the North Sea oil and gas industry will begin a strike over pay from midnight on Tuesday, a union said.This represents the vast majority of divers operating in the North Sea and whilst diving activity scales down in winter months the diving that does take place is likely critical with this strike having the potential to force closures, probably on health and safety grounds. We'll have to wait and see what impact this has. Does anyone have any more information on this strike?Steve Todd, secretary of the National Union of Rail, Maritime & Transport Workers (RMT) said an indefinite strike could significantly disrupt North Sea oil and gas output.
The DTI document lists August 2006 indigenous production of oil as 4.730 million tonnes along with million tones of NGL 0.483 million tonnes of NGL. Using the DTI conversion figures of 1 tonne = 7.5 bbls for crude oil and 1 tonne = 11.5 bbls for NGL this comes out as a mere 1.323 million barrels/day.
According to UK oil production data from the DTI provided here the August production looks to be the lowest for 28 years, lower even than in the months following the Piper Alpha explosion.
Imports are also listed. For August the UK net imports after subtracting exports were a total of 1.682 million tonnes of oil, NGL, process oils and petroleum products. This comes out as approximately 0.42 million barrels/day.
The Government's Energy Review of July 2006 suggested the UK would not be a net importer until 2010.
Buzzard (pdf) is the only major new field to come on line with a capacity of 0.2 million barrels per day at the end of this year. This will not even cover half the current net imports let alone make for further falls from existing fields.
Cry Wolf covered UK production and DTI production forecasts in more detail last month in his excellent article Lies, Damned Lies and Government Oil Production Forecasts? This latest information only supports the doubts expressed there about future UK production.
Someone's going to be sorely disappointed with North Sea performance as the decade comes to a close.
By coincidence (ha!) the ways being proposed by Stern to reduce CO2 emissions are in many ways the same as the ways proposed to deal with peak oil. Packaging things up with a climate change wrapper is fine by me - what matters is that the use of fossil fuels is driven down.
I don't know if this is deliberate or if it has arisen by accident, but I do discern that there is a sensible long term strategy emerging that could deal (at the UK level) with both climate change and peak oil. If the Stern Review recommendations are followed the impact of peak oil on UK should be substantially ameliorated over the longer term.
Having said this, the high rate of depletion of the North Sea output is still going to create some difficult problems for UK plc until the CO2 reduction measures start to have a significant effect.
http://www.theoildrum.com/story/2006/10/30/11951/613#25
more or less voicing the same question that you raise. If you have read my Lies Damned Lies post you will see that I belive that denial lies at the heart of the problem. Once the reality of UK oil and gas production sinks in, I think the £GBP will take a huge hit - raising the cost of imports and interest rates.
Only way out is for the UK to join the Euro.
CW
I haden't thought about trying to mitigate things by joining the Euro. Maybe if the Supergrid being proposed by Airtricity takes off it would make sense. However, the Euro will probably be heading south along with Sterling then anyway.
It's easy to see a world where the US dollar is 40% devalued (such would be logical, and should have happened, bar domestic Chinese and other South East Asian policies, which prefer to hold down their domestic currencies by holding USD assets).
But a really big devaluation beyond that, when roughly half the world's economy is denominated in dollars, is hard to see.
Also Europe is in a relatively worse position in a PO scenario. Yes we consume less, but we import 80% of our energy (coal mines in eastern Europe, and some renewables, plus of course the North Sea, but that is about it).
The US by contrast is the world's largest or second largest coal producer. Plus it has access to Canadian tar sands, Arctic gas etc. And it has big biomass resources (wood for heating etc.).
Another factor (the same for CO2 emissions) is that the US would find it relatively easy to reduce energy consumption-- simply switching to diesel powered cars, ditching SUVs etc. By and large, Europe has already made those sacrifices.
Eventually Italy will find a way to exit, and Greece also-- both countries are effectively having their economies strangled by deflation.
I don't think many of the EU25 countries that are not in the Euro (UK, Denmark, Hungary, Poland etc.) are likely to rush to join it-- the ones who would benefit (Hungary) are precisely the ones in the worst fiscal position and break the ECB rules.
The euro will revert to what it always was: a Franco-German currency union, with Benelux (and maybe the Irish and the Spanish) along for the ride.
And by now, the banks have gotten used to living without the money they used to be able extract from intra-EU trade, which means that EU wide companies - oh, like Unilever, or VW, or Barilla - find a lot of benefit in the euro.
Whether the euro has a longer term future than the dollar is open, but quite honestly, for the economies within the euro, the negative side is incresinly harder to firmly determine.
Would one of the regulars (Cry Wolf, Chris Vernon?) edit http://en.wikipedia.org/wiki/Energy_use_and_conservation_in_the_United_Kingdom (which is the main wikipedia article on UK energy) and add some realism, perhaps in the "energy gap" section?
If not, I may have a go. I would need permission to use some graphics (there was a nice graph of I think net UK energy production and consumption) which would have to be available under the GPL or public domain.
Toby
I agree that this section in Wikipedia should be accurate - this is part of the information / miss-information explosion and curse.
CW
www.rigzone.com
BBC Scotland
Divers do a lot of work during the summer maintenance season and so the view was that this is a curious time ofr divers to go on strike. One theory was that this was so they could attend the beer festival where all this vital information was gleaned.
Its really curious that there has not been a lot of news coverage on this. The UK trade balance will I imagine be plunging into the red... draw your own conclusions about the economic impact.
UK Chancellor Gordon Brown, known as Prudence, increased borrowing on and off balance sheet, increased taxation, increased public spending
https://www.cia.gov/cia/publications/factbook/geos/uk.html#Econ
(Damn! https doesn't linkify automatically).
The UK has a 2 trillion dollar economy. 1 million barrels per day (nice round number, way more than the UK's oil deficit at the moment) equals about 1% of that. A steady increase in net oil imports isn't good news for the balance of trade, but it isn't exactly apocalyptic.
Sometimes I think ToD contributors forget that there is more to life than hydrocarbons. Somehow the UK survived many decades of importing ALL its oil.
It did indeed but your talking about a period before the late 1970s when
a) the UK had a large manufacturing base - ie when it actually made things (as I recall that base is now down to around 17% of the total economy)
b) the UK did from 'time to time' actually had surpluses in its balance of trades.
From what I recall the Uk economy has been in deficit in termes of balance of trade for a number of years now (and that position has been gradually wosening). Now that oil is going to be a net (and rapidly increasing) negative to that, rather than a positive, I think the consequences are going to be serious for the UK (and more specifically the pound). As crywolf points out its astonishing the mainstream media in the UK dont pick up on this.
After all the figures are very clear and the DTI publish them frequently - basically 2006 will be the first year in which imports exceed exports (2005 was only narrowly positive), barring an epic turnaround in the last few months of the year. And yet the DTI still adheres to the fiction that 2010 will mark the turnaround. By 2010 at present depletion rates of around 10% the gap between exports and imports will be vast........
http://www.statistics.gov.uk/cci/nugget.asp?id=199
That position can now only worsen as oil exports fall below imports (barring a collapse in the average John's desire for Chinese goods)
Like you, I don't expect any major turnround in the UK sector, in 2010 or any other year. Just steady composite-exponential decline (with some modest reduction of the overall annual percentage decline rate, for technical reasons I won't bore you with). Every so often there will be a discovery in the hundred million barrel range that gets blown out of proportion by the scandal-sheets.
If you are a ToD regular (like me), consider the possibility that oil looms larger in your overall worldview than its true importance would justify.
The UK has no such 'luck' to fall back on.
And yes trade deficits do eventually bite, generally via currency devaluations and then via their impact on long term interest rates (ask the good folk of Iceland).
I am no fan of the Euro, but Europhiles do finally have one coherent arguement now for the UK joining - to prevent the pound taking a caning as the trade balance begins a one way trip south.
I agree with you that the US 'gets away' with its huge trade deficit because of the dollars position as the world's currency. I also agree with your implication that this might not last forever.
I don't, however, think you are right about the UK having no such luck. The UK, in fact, also benefits massively from the dollar being the world's reserve currency: London is the main world centre for 'eurodollars' (ie. dollars which are deposited in banks outside of the US). This means that there are huge capital flows into the UK which would not exist if the dollar were not the world currency.
The bigger the US trade deficit gets, the more dollars there are likely to be being deposited outside of the US and the more money tends to flow into the UK. It is this capital surplus which allows the UK to run a persistent trade deficit without its currency collapsing. (Another reason is that the pound Sterling also has small reserve status itself).
This dependence of the UK economy on the dollar's reserve status is certainly one reason why the UK is not in the eurozone, and has a foreign policy which is so closely linked to that of the US. When the US went to war against the euro in Iraq, so did the UK.
If you're really interested in the answer to that question, look here...
http://uk.theoildrum.com/story/2006/9/17/135527/399
... a lot more than they'll be importing any time soon. Of course, back then they were building oil-fired thermal power stations (Grain, Fawley, Ince, Pembroke).
Never could afford the 1275cc Cooper S...
Then, as now we drove ~12,000 miles a year... on mostly empty motorways... but then petrol at decimalisation in 1971... was 30p...
And against the average weekly wage?
The data shows that the real cost of motoring has fallen by about 10% since 1972 (and real per capita incomes have doubled, more or less)-- this includes insurance, fuel, road tax, depreciation*. Conversely the cost of train fares has risen 60% in real terms, and of buses 40%.
* the big drop has been in the price of a car, or to be specific, the price of a car with the level of equipment that we now take as standard (air conditioning, air bags, etc.).
If almost everyone is importing, who is exporting?
You can find others by searching under authors for Jeffrey Brown.
- Nigeria
- Angola
- Kuwait
- Saudi
- UAE
- Russia
- Chad
- Sudan
- Azerbaijan
- Iraq
- Iran
...amongst many others, and at vastly different rates and with vastly different resource bases and prospects for future growth (mostly none). If I wanted a comprehensive list I'd do the same as you and look at the BP Stat Rev, with an appropriately critical eye. And I'm well aware of the "decline steepening" effect that constant, yet alone increasing, domestic consumption has on export capacity. And yes I know Iran has been importing gasoline. Yawn.What is your point? And please don't lump me in with the Cornucopians, 'cause I ain't.
Saudi: They are about 58% depleted, and at the same point that the prior swing producer, Texas, started declining, and the Saudis are reporting new "voluntary" cuts every few months.
Russia: Hugely depleted (at least from existing basins), around 85% or so. The recent rebound in production just make up for what was not produced after the Soviet collapse. Recent news reports suggest that production and exports have started falling again. I predict that the big news next year will be the confirmed declines of both Saudi Arabia (KSA) and Russia.
Iraq: 'Nuff said
Iran: I believe that they are about 50% depleted.
In any case, my original TOD post in January focused on the top three net oil exporters--KSA; Russia and Norway.
I predicted, based on Khebab's work, that we would see continued declines in Norway, with KSA and Russia also showing declining production this year. KSA is definitely down. Five of the past eight months of EIA data have shown Russian C+C production to be below the 12/05 level, and as noted above recent news reports indicate production and export declines. As I have repeatedly predicted, Russian and KSA consumption are growing quite rapidly.
Is there no connection between Qt and reserves? Are Qt estimations solely based on HL predictions of total recoverable? Otherwise, given the huge reserve estimation difference in Kuwait, how can one say what Qt really is or determine where 50% is?
Yep, even Genesis are getting back together! Soon long hair (maybe because many people won't be able to afford a haircut) ... and long lines at the petrol pumps will be back too.
And if you think hydrocarbons don't matter to the Uk economy, consider that 28,000 people opted for bankruptcy in the second quarter of this year - multiply x5 for a US equivalent. If continued that would be 0.5% of the working population per year. There is a big chance IMHO that the personal debt and housing bubbles are going to burst horribly in the next 2-3 years.
I have been a stale bear of UK housing for 6 or so years now.
I can't see how prices in my neighbourhood can keep going up: at least triple since 1995. Although London is doing well (financial services) the average person just hasn't had that kind of income rise.
It seems to me a giant pyramid in the making. You can get 100% and even 120% mortgages now.
It is shocking how far people, especially the sub 35 crowd, seem to be willing to get into debt.
I think the banks know they have a problem: I have noted fewer credit card offers in the post.
however the rise of UK bankruptcies is in part due to new forms of personal voluntary arrangement. So it's a legal transition, as well as a sign of over indebtedness.