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UK DATA: North Sea oil output creeps up in April, but down 5% on year

Highlights

North Sea adapts to coronavirus, but uncertainty remains

Lockdown makes UK net exporter for first time in a decade

Repsol Sinopec to decommission Balmoral-linked fields

London — UK oil production recovered by 4% on the month in April, but was still down 5% on the year, at 1.07 million b/d, data published June 25 showed, underlining the sector's muted prospects.

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Crude oil production for April was up 4% at 973,000 b/d, while output of natural gas liquids was barely changed at 93,000 b/d, the data from the Department for Business, Energy & Industrial Strategy showed.

The month-on-month recovery suggested an adaptation to the threat the coronavirus poses to North Sea offshore workers, but workforce reductions may have inhibited operators from producing at maximum levels, industry insiders have said.

Companies have also announced a string of permanent shutdowns of mature oil fields, with some out of action for technical reasons before the pandemic hit, and others deemed unviable in a low-price environment. The fields to be decommissioned, however, account for a modest portion of production.

Spanish-Chinese venture Repsol Sinopec said June 25 it would decommission two fields, Beauly and Burghley, which rely on Premier Oil's Balmoral oil field infrastructure, after Premier announced it would decommission the hub in October. The cluster of fields as a whole produced 3,000 b/d last year.

Beauly and Burghley "will cease production at same time as the Balmoral hub as they are at the end of their life and therefore production through another facility is not considered economically feasible," Repsol Sinopec told S&P Global Platts by email. "At that time Beauly and Burghley-related infrastructure will be made safe pending final decommissioning at a later stage."

Export turnaround

The BEIS statistics showed the UK's health protection lockdown had a major impact on UK oil trade in April; for the first time in a decade the country became a net exporter of oil -- taken as a commodity class including products and feedstocks -- with net exports totaling 450,000 mt for the month, BEIS said.

Total UK imports fell to their lowest in more than two decades, with crude and NGL imports down 47% at 2.19 million mt, and petroleum product imports down 48% at 1.72 million mt.

Generally, the meltdown in markets is seen as having a limited immediate impact on UK production, with the cancellation of inessential maintenance supporting output through the summer. But severe spending cuts by operators of all sizes pose a major challenge for future production prospects, with nearby Norway expected to have a more solid recovery.