(Bloomberg) — British natural gas production is falling faster than expected and leading to greater dependence on imports, according to an industry group seeking government support to encourage investment.
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Output was down about 13% year-on-year this year through August, and a similar rate is possible for the whole of 2024, said Ross Dornan, market intelligence manager at Offshore Energies UK. That compares with the forecast of a 10% decline earlier this year for Britain’s aging North Sea basin.
“We have to be a little concerned about production from the basin and the faster decline,” he said in an interview. “There’s not a huge amount of new production coming through.”
The group, known as OEUK, is seeking some support for domestic energy investment in the government’s autumn budget, due on October 30. The previous Conservative government imposed a windfall tax on oil and gas profits during the energy crisis two years ago, and Labor plans to increase the levy further to close the budget deficit.
According to OEUK, Britain’s new tax system could lead to an 80% drop in investment in oil and gas over the next five years. The group has noted that Shell Plc’s Victory gas field in the North Sea may be the only one with a final investment decision in 2024.
Britain’s energy production now equals just 60% of demand, the group said this month. Meanwhile, the European gas market remains sensitive to supply risks, with prices fluctuating sharply due to geopolitical tensions and unplanned outages.
According to Dornan, Britain is now producing around 90 million cubic meters of gas per day, after volumes were restored by field maintenance over the summer. According to gas network operator National Gas Transmission Plc, average consumption this heating season could reach 85 million cubic meters per day, lower than the previous two years.
Falling oil
British oil production has also fallen, with an expected drop of around 10% this year, Dornan said. From January through August, oil production averaged 660,000 barrels per day, he said, adding that full-year figures “could be slightly lower.”
Daily production of both oil and gas averaged 1.11 million barrels of oil equivalent in the first eight months of the year, down about 11% year-on-year.
Daily production is expected to fall to around 700,000 barrels by the end of this decade, estimates the North Sea Transition Authority, the sector’s regulator. Even that can be optimistic, according to Dornan.
“That is possible, but it can only be achieved by advancing new investments at a better pace than is currently the case,” he said. “And that is a big concern.”
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