UK oil production sees record increase, Shell and BP fret over price slump

Official British GDP data for the second quarter of this year, pointing to economic growth of 0.7% between April and June, was not a major surprise. That the UK’s Office for National Statistics attributed the uptick in large parts to oil and gas production most certainly was. In a low price environment, with a persistent supply glut, an uptick in North Sea oil and gas production lifted the country’s headline industrial output by 1% for the quarter; the biggest increase since late 2010.

More specifically, the ‘mining and quarrying’ component of British industrial output data, which includes oil and gas production in the main, rose by 7.8% in the quarter; the biggest increase since 1989.

With North Sea having peaked in 1999, a welcome uptick of this magnitude has perhaps come at the most unwelcome of times as the wider market already awash with oil. Much of this is down to tax cuts announced in March by Chancellor George Osborne designed to boost production.

An oil rig in the British sector the North Sea © BP Plc

While the news will give heart to those fighting the case for marginal producers, and reinforce sentiment of a prolonged tussle between oil producers, two London-listed global oil and gas majors – BP and Shell – queued up to warn of a low oil price environment. On Tuesday, BP chief executive Bob Dudley, who is preparing his company to square up to a $60 per barrel oil price for at least the next three financial years, warned that an operating climate with low oil prices was not going away anytime soon.

“In the past few weeks oil prices have fallen back in response to continued oversupply and market weakness and the recent agreements regarding Iran. I am confident that positioning BP for a period of weaker prices is the right course to take, and will serve the company well for the future,” Dudley said, as his company posted a 64% decline in second quarter replacement cost profit to $1.31 billion.

http://www.forbes.com/sites/gauravsharma/2015/07/30/uk-oil-production-sees-record-increase-as-shell-and-bp-fret-over-price-slump/2/?ss=energy