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UK DATA: Oil output drops 12% on year in Jan-Feb

Highlights

Start-of-year drop foreshadows summer maintenance

OGUK sees 5-7%/yr 2021-22 hydrocarbon output fall

UK becomes net oil exporter in February on low demand

London — UK oil output dropped 12% in the first two months of 2021 compared with a year earlier, to 997,000 b/d, according to data published April 29, likely reflecting maintenance, a drop-off in drilling levels, and weak investment.

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Within the total volume produced, crude oil accounted for 905,000 b/d, a 13% drop, and the remainder natural gas liquids, the statistical release from the Department for Business, Energy & Industrial Strategy showed.

The weak production numbers are expected to foreshadow steep reductions over the summer due to maintenance.

The Forties pipeline is due for a major overhaul starting May 27, curtailing loadings of the Forties crude stream, a component in the Dated Brent benchmark.

Some recovery can be expected as maintenance is completed in the third quarter, but industry group Oil & Gas UK warned in March of underlying weakness, particularly in investment, evident even before the COVID-19 pandemic.

BP has encountered particular challenges at its large production facilities in the West of Shetland area, and on April 15 announced it was halting production at the oldest West of Shetland field, Foinaven.

OGUK expects total oil and gas production to fall by 5-7% annually in 2021 and 2022, following a 5% fall last year. It estimates the UK offshore industry's capital and operating expenditure was down 23% last year at GBP3.4 billion ($4.7 billion).

Lower spending has meant "drilling activity falling by half and some of the lowest levels of new project approvals on record, as companies responded to the price collapse and reduced offshore personnel levels by around one-fifth to help manage COVID-19 exposure risk," it said in its business outlook report last month.

BEIS also noted the UK again became a net oil exporter in February for the first time since demand collapsed in May and June 2020. "This switch was largely due to a decrease in imports of crude and natural gas liquids, which were down 38% in the three months to February compared to the same period in the previous year. Imports of petroleum products were also down 24% in the same period as the pandemic continues to affect demand," the BEIS commentary said.

Note: crude oil figures converted at a rate of 7.55 barrels/metric ton, NGLs at 11.5 b/mt.