12 December 2024 POTEN & PARTNERS
Lower North Sea output accelerates fall in ton-mile demand Yesterday, Equinor and Shell, two major European oil companies with a rich history of exploration and production in the North Sea decided to combine their UK offshore oil and gas assets in a 50/50 Joint Venture (JV). The JV is not growth oriented. To the contrary, the JV will harvest value as the assets naturally decline. The objective is to improve the tax efficiency of the operations and pool their costs. It is the latest development in the rapidly maturing UK North Sea basin. While the situation in the Norwegian Continental Shelf is more positive in the short-term, with output expected to grow slightly in 2025, the long-term trajectory for Norway is also challenging. The IEA expects the total North Sea production will decline by 400,000 b/d by 2030. These changes in North Sea production and exports have obvious implications for the tanker market.
The first significant offshore oil discovery in the North Sea occurred in 1969, when Phillips Petroleum discovered the Ekofisk field in the Norwegian sector of the North Sea. Production started in 1971 and today, Ekofisk remains one of the most important oil fields in the region, producing approximately 127,000 b/d. The oil crises of the 1970s, including the 1973 OPEC oil embargo and the 1979 Iranian revolution led to sharp increase in oil prices, causing widespread economic turmoil in Western Europe and the United States. As a result, these countries, realizing their dependence on the Middle East and other external sources of energy, started to focus on developing alternative sources of energy supply. The significant increase in prices also created an economic incentive for countries to develop their own oil resources. The UK and Norway accelerated exploration and production efforts in the North Sea.
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