Survey of oil industry chiefs shows confidence in North Sea doubling in one year

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Reported in Oil & Gas People, on 1st February 2018, a survey of more than 800 executives found 63% confident of growth in 2018 compared with only 32% last year. According to the report:

‘A new optimism is now emerging, driven from a common understanding that cost levels are under control and operators can make reasonable margins from an oil price that is expected to stay lower for much longer.’

https://www.oilandgaspeople.com/news/16017/surge-in-oil-and-gas-industry-confidence/

I presume they meant ‘higher’ not ‘lower’ and by ‘reasonable margins’, they meant ‘healthy margins’ with crude selling at $70pb and costing only $12-15pb to extract. Given the many reports of increased and stable prices along with major discoveries already reported here, I’m surprised the number expressing confidence was not higher. See these:

Scottish oil price rises are unstoppable as hedge funds pile in to invest and put ‘the oil crash behind us.’ Also, Sterling’s surge is being fuelled by oil, not a Brexit bounce .

As profits double will Royal Dutch Shell start paying taxes for Scottish oil again?

Is a third forecast that Scotland’s oil will hit $100 per barrel again, a sure sign?

I suppose industry chiefs are not going to want to appear too bullish in case we start thinking we should be taxing them more.

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9 thoughts on “Survey of oil industry chiefs shows confidence in North Sea doubling in one year

  1. Bugger (the Panda) February 3, 2018 / 10:52 am

    So why are we not taxing this?

    They have had their tax holiday

    Like

  2. Marlene February 5, 2018 / 3:04 pm

    Like you I’ve come across the $12/barrel figure for production costs and it seems that, also like you, I’ve assumed that anything more than a selling price of $12 puts the oil companies into profit. But…

    I’ve been trying to educate myself about North Sea oil, in particular about the different approaches taken by UK and Norwegian governments. The results are in two posts in my blog. The first is called Please, Norway, Could you help us Look After Our Oil? here: http://paleblueplanet.net/?p=2583

    It starts with this quote from Norsk Petroleum: “The overall objective of Norway’s petroleum policy has always been to provide a framework for the profitable production of oil and gas in the long term.
It has also been considered important to ensure that as large as possible a share of the value creation accrues to the state, so that it can benefit society as a whole. This is partly obtained by the tax system.”


    In the process of writing the posts I found statements about UK sector production costs coming down to $12-15/ barrel but I also discovered that the $12 figure isn’t the whole cost of production. When all the costs are included it looks like the breakeven price is nearer $44/barrel for oil in UK sector. In the Norwegian sector the breakeven looks to be about $21. We probably need a geologist to explain that difference!

    I can’t find a way to add a screenshot here but this is the link to the post with production cost info: http://paleblueplanet.net/?p=2609

    And this is the link to the original reference with production costs and a nice interactive graph 🙂 http://graphics.wsj.com/oil-barrel-breakdown/

    Like

    • johnrobertson834 February 5, 2018 / 4:48 pm

      Thanks Marlene but if the BP Chief says he can raise it at less that $15pb?

      Like

      • Marlene February 5, 2018 / 5:20 pm

        In 2016, Wall St Journal had UK sector costing $44/barrel to produce which was taxes: $0; capital costs: $23; production costs: $17 and admin/transportation $4. All of which adds up to $44. So if production costs are now $12/barrel then that takes the breakeven to $39.

        Those figures fit with the FT Sept article quoting Ben van Beurden, chief executive of Shell, who said the cost savings meant that certain North Sea assets that were losing money when oil prices were above $100 a barrel were now profitable at current prices of about $50. That was the same report that quoted the BP CEO saying production costs were down to $15 and he thought they would decrease to $12 by 2020. I used to have the link but FT isn’t letting me read it anymore.

        But hey, if only we were in control in our oil we could tax all that profit!! I have my doubts that the Treasury will do that.

        Like

  3. Ludo Thierry February 5, 2018 / 8:12 pm

    The Buchan Observer is reporting a generous £60,000 donation by Hywind to the Peterhead RNLI. NOTE: Statoil pay substantial taxes to the Norwegian exchequer (and, doubtless, other national exchequers where they operate) – The vast bulk of companies operating in the Scottish Sector appear to get off ‘Scot -Free’ from paying any taxes into the UK exchequer. I wonder how many of those companies who are gaining from the ‘no tax’ environment are even making similar goodwill donations to help the local area in the way Statoil and Masdar have?: see below:

    Hywind donation to RNLI :Published: 16:27 Monday 05 February 2018 Energy company Statoil and its partners Masdar, have donated £60,000 to the RNLI following the development of Hywind Scotland. The donation will be used by the RNLI to support the annual running costs of the Peterhead Lifeboat.

    Like

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