BP issues grim warning over North Sea oil

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By Sam Fleming, Daily Mail, London

LONDON — British production in the North Sea is set to drop to levels not seen since the late 1970s, BP statistics suggested.

Chief executive Tony Hayward said output will fall by at least 5pc a year in the coming years, and if investment is not stepped up the declines could be even steeper.

Just 1.54m barrels of oil were produced in 2008, compared with a peak of 2.9m in 1999, and continued declines will leave output at its weakest since 1978. Combined oil and gas production has fallen to 2.6m barrels a day.

“The North Sea is a mature and declining province,” said Hayward. “It will decline for sure at 5pc per year, and if the investment doesn’t go in — and this year it is not going in — it will probably decline at a faster rate.”

The report is grim news for the Treasury, which expects to generate almost £7bn of tax revenue from the North Sea this year alone.

At the current rate of production, the UK has six years of oil left and just under five years of gas, BP’s annual Statistical Review of Energy showed.

Making matters worse, the credit crunch is likely to lead to a halving of North Sea investment in 2010 compared with last year, according to industry lobby group Oil and Gas UK.

A spokesman said: “The UK has been producing for 40 years and it’s a mature basin. The challenge is to slow the decline to make it as flat as possible.” Across the world, proved oil reserves fell by 3bn barrels to 1.26 trillion last year, BP said.

Global oil consumption fell 0.6pc in 2008, the largest drop since 1982, as the recession eroded demand and high prices encouraged Americans to cut back.

But Hayward was upbeat about future world output, saying many of the impediments to oil production were political rather than geological.

Overall there are 42 years of proved reserves left around the world, BP’s figures showed.

And the lifespan of our remaining resources has held above 40 for the past decade as explorers uncover additional fields.

As such, the long-term oil price should remain at between $60 and $90 a barrel, Hayward said.

Russia’s state gas champion Gazprom offered a rather less optimistic outlook, however.

Chairman Alexei Miller reiterated forecasts that crude prices could spike an unprecedented $250 a barrel.

The cost of a barrel exceeded $147 last summer, before falling dramatically back into the $40s this year as the recession bites.

Yesterday it continued its recent rally, as Brent crude advanced 2pc to $71 a barrel — the highest since last November.

CRUDE PREDICTIONS

–BP: Cost of a barrel could hover between $60 and $90

–Gazprom: Oil price is set to rocket to $250

–Goldman Sachs: Oil price will hit $95 by end of 2010

–OPEC: The world can weather a $75-$80 crude oil price

–Shell: “It’s difficult to see an uptick in the oil or gas price.”

Copyright (c) 2009, Daily Mail, London

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