In the wake of the Scottish Independence Referendum in 2014, remain voters indulged in the sweet I-told-you-so once the price of Brent Crude began to plummet. The North Sea was thought to have provided Scotland with an instrument of economic sovereignty, but with oil prices falling by a delta of over 50 per cent, a number of pre-independence assumptions have had to be re-assessed.
Since then however, oil prices have begun to stabilise, companies have adjusted to the low price environment, and with an increase in corporate activity, there are now reasons to be cautiously optimistic about the North Sea’s place in the oil and gas industry.
Three years on, and the North Sea remains a topic of contention. In a recent study conducted by the University of Edinburgh, the remaining value in the North Sea has again been subject to a recalculation. The research estimates that only “10 per cent of the UK’s original recoverable oil and gas remains”, and condemns the economic feasibility of fracking due to “a lack of sites with suitable geology”. The study concludes with a recommendation of greater renewable energy consumption, as the UK could find itself with a resource shortfall within the next decade.
“The UK needs a bold energy transition plan, instead of trusting to dwindling fossil fuel reserves and possible fracking,” stated Roy Thompson of Edinburgh University’s School of GeoSciences.
He also described N56, a nationalist pressure group, as having “no geo-technical evidence, from either drilling or production tests” to substantiate comments they made prior to the Independence Referendum; N56 had claimed Scotland would encounter an “oil bonanza that heralds a new golden age for the North Sea lasting for another century.”
UK oil and gas demand is expected to remain high over the next ten years. As the implementation of renewable energy strategies gain traction, aviation and growth in the production of petrochemicals and plastics – for which oil provides a major input – are likely to increase. This high demand in conjunction with a disappointing couple of years for exploration and discovery in the region, suggests the UK could find itself in the midst of a supply shortfall.
There is obviously cause for concern, but The Oil and Gas Authority have indicated that the conclusions of the study are unfounded, with a predicted 20 billion barrels of oil and gas equivalent still to be recovered offshore.
Deidre Michie, an Oil & Gas UK Chief Executive stated, “Production has increased over the last two years and we expect that to continue to rise.”
She goes on to outline a number of new oil fields and large developments due to continue production lasting until 2050. A government spokesman stated, “we do not recognize these figures” adding further credence to the study’s controversy.
The sentiment behind Thompson’s study and the urge for a sustainable energy plan that incorporates renewables should undoubtably be encouraged, however it may be that current developments have been overlooked. If costs of operation can be kept appropriately low, and further investment can help “maintain a relentless focus on exploration and enhanced recovery,” then this study may not necessarily be all doom and gloom. The potential of the UK Continental Shelf may still be achievable yet.