Oil price crash: can the North Sea survive at US$30/bbl?
The North Sea has weathered several storms in its 50-year existence. But the past fortnight has thrown it into uncharted waters. The coronavirus pandemic and collapse in OPEC+ production restraint, has seen Brent reach its lowest point since 2003. In the short-term, the North Sea can survive. Cost reductions achieved during the last downturn mean 95% of onstream production is ‘in the money’ at US$30/bbl. But close to a quarter of fields will run at a loss in this price environment. The major concern here is not volumes. Early shut-ins would accelerate US$20 billion in decommissioning spend. What levers can the industry pull to ensure a sustainable future? The quickest win is to reduce opex. But longer term, investment is required increase production and reduce unit costs. If the industry goes into harvest mode, a premature end is inevitable.