Investors shun North Sea despite rebounding oil prices
Despite a recent spike in oil prices, energy industry chiefs warn that infrastructure investment in the North Sea will not jump in tandem.world Updated: Jun 21, 2009 12:07 IST
Despite a recent spike in oil prices, energy industry chiefs warn that infrastructure investment in the North Sea will not jump in tandem.
Scaring investors away is market volatility, they say.
Bosses from the oil and gas sector gathered last week in the Scottish coastal city of Aberdeen for an industry conference that delivered little optimism regarding the outlook for North Sea development.
Oil & Gas UK, an organisation representing Britain's offshore energy industry, hosted the Aberdeen gathering amid a sharp domestic downturn that has curbed business investment across the country.
"Businesses have already found 2009 a turbulent, tough year and the UK offshore oil and gas industry is no more immune to these pressures than the rest of the economy," Oil & Gas UK said in a statement.
"There is growing concern that the rapid fall in oil prices and the freezing of capital markets will impair investment and suppress production in the North Sea, with wider implications for companies and employment across the supply chain."
Oil prices, despite a solid rally in recent months, languish more than 50 percent beneath record highs that were struck one year ago.
"Even the short term, recovery in oil prices of the last two or three months is way too early to positively impact people's decision (to invest) in the long term," Bob Keiller, chief executive of energy industry services provider PSN, said on the sidelines of the conference.
"The volatility (of oil prices) has affected the confidence in investments," added Keiller in Aberdeen, a city whose wealth has ballooned since the discovery of oil in the neighbouring North Sea during the 1970s.
Widely-traded Brent North Sea crude oil currently stands at about 70 dollars a barrel, more than double its level in December when the sharp global recession severely dented demand for energy.
Prices however remain more than half their level of July 2008 when fears about supply disruptions had sent them rocketing to record highs above 147 dollars.
According to Oil & Gas UK, expenditure on North Sea exploration was down 70 percent at the start of 2009 compared to a year earlier.