North Sea exploration in biggest slump for five years

North Sea Oil Exploration

North Sea oil and gas exploration dropped by 35 per cent last year, taking it back to levels last seen five years ago, according to figures published by Deloitte yesterday.

Throughout the whole of 2009, only 78 new wells were drilled in the North Sea region in 2009, compared with the 121 drilled in 2008. Meanwhile exploration was down by almost 50 percent and appraisals by 25. However, in somewhat of an anomaly new drilling in the Norwegian North Sea shot up by 18 percent last year thanks to a more generous tax regime.

Harsh taxes are said to be the reason that activity in the UK's North Sea activity has been stunted. Oil production is also by far the most highly taxed part of the British economy, with its own special rate of 50 percent, rising to 75 percent for older fields.

Positive outlook for 2010

"The North Sea is in decline as a source of hydrocarbons and although there are companies out prospecting for more, Britain has no real incentives to encourage them and slow down the decline," Graham Sadler, the managing director of Deloitte's Petroleum Services Group, to UK newspaper the Independent.

Elsewhere the value of oil and gas deals announced last year increased by 10 percent from 2008 to $198 billion, although the total number of deals fell from 1,152 to 837, according to Ernst & Young's third annual global oil and gas transactions review.

Upstream deals accounted for 72 percent of oil and gas deals announced in 2009, leading to a positive outlook for the sector in 2010, says Ernst & Young.

"Stronger exploration budgets"

"The positive trends that we have seen in recent months are likely to continue into 2010 and the outlook for oil and gas transactions is healthy in upstream and oilfield services," says Andy Brogan, global oil and gas transaction advisory leader at Ernst & Young.

A strong recovery in the upstream sector has been attributed to higher oil prices generating a scurry of equity investments.

Jon Clark, oil and gas director at Ernst & Young, said: "The oil price has strengthened, equity capital is starting to flow back into the sector, development projects are coming back on stream with increasing frequency, and stronger exploration budgets are being set for 2010."

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