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Business gas: UKCS production up 2.5% in first half of 2015

Oil and gas production from the UK Continental Shelf (UKCS) over 1H15 could be 2.5% higher year-on-year, according to industry trade association Oil & Gas UK.

Recent provisional figures from the Department for Energy (DECC) suggest that reforms (which we previously reported were urgent) are progressing. Initial indications suggest that production could increase in 2015 for the first time in 15 years, Oil & Gas UK reported. Liquids production (primarily oil) is up around 3% and net gas production is up around 2.5% year-on-year.

Production in 2Q15 “looks particularly encouraging”, with early figures suggesting that May saw the most oil and gas produced on the UKCS since March 2012.

Oil & Gas UK believes the improved performance is partly due to production from the large Golden Eagle field, which only started producing in November 2014, as well as – importantly – stronger delivery from existing assets.

Nevertheless, there are still difficulties: “Clearly the oil price – which has more than halved since this time last year – continues to really challenge the industry,” said Deirdre Michie, chief executive, Oil & Gas UK. “[T]he oil and gas industry must become sustainable in a world with a considerably lower oil price. As demand for our products remains strong, critical for our transport and heating our homes and giving us a whole host of everyday products, it is imperative we continue on this journey if we are to continue to ensure the UK remains a commercially attractive and predictable place in which to invest.”

Business gas prices

An overall rise in production this year would help put downward pressure on business gas rates, especially given the boom in US fracking and shale gas production. In the short term, prices could remain static or even fall, although ongoing unrest in Ukraine – still one of the main routes for gas from Russia into Europe – combined with delays to planned gas pipelines, could seriously constrict supply.

In the medium term, low cost gas exports from the US and Middle East (and possibly elsewhere, should fracking become more widely acceptable) could make for cheap business gas in the UK but simultaneously undermine the UKCS industry. Growing demand for floating liquid natural gas (FLNG) could also be a driver of increased business gas prices, especially if the expected lifting of the US export ban does not go to plan.

The unpredictability in supply is matched by uncertainties over demand, especially adverse winter weather. A ‘perfect storm’ of conditions could see gas prices rapidly increase, making it important for UK SMEs to carefully consider their position: taking the time to compare business gas deals currently in the market and, if the current tariff is not favourable, switch gas supplier, could pay dividends.

For those lacking the time to call around suppliers, offers a straightforward solution: a no-obligation comprehensive comparison of business electricity and gas suppliers in just 20 minutes. Fill in our simple form (also at the top right of this page) or give us a call on 0330 0100 251 now.

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