EMEA News
Pundits Conflicted On Whether Brexit Is A Blessing Or Curse To North Sea Oil Operators
Just as Brexit has caused a striking division of opinion about how it will affect Britain and Europe, so too has it caused a dramatic contradiction of opinion on its impact on North Sea oil operations.
Bloomberg reports that the uncertain investment climate generated by Britain's vote to leave the European Union has caused the rate of North Sea oil field shut-downs to increase.
Citing as evidence for this is Oil & Gas U.K. figures that project British sector decommissioning spending in the decade to 2024 to rise by 16.9 billion pounds ($22.2 billion), or 16 percent higher than a 10-year forecast in 2014.
Fiona Legate, an analyst with Wood Mackenzie, is quoted as saying that "This has increased the number of fields we expect to cease in the near term, which has increased decommissioning costs; there is a lot of political uncertainty in the U.K. following Brexit, and this adds another complexity in investment decisions."
Kimberley Wood, a partner at law firm Norton Rose Fulbright LLP, agrees that "Uncertainty may impact investment levels, and lower investment can in turn potentially bring decommissioning forward for some fields."
But the Wall Street Journal views Brexit's impact in a markedly different light: it points out that the Pound's post-Brexit vote weakness "has thrown a lifeline to a group of businesses on the brink: small oil companies plying the North Sea."
Tony Durrant, chief executive of Premier Oil PLC, (a London-based company that pumps about 60,000 barrels daily, mostly from the North Sea) is quoted as saying, "I don't really see any negatives, other than general market uncertainty; our dollar income is going to buy more and it's going to reduce our costs."
Durrant added that the pound's decline has enabled his company to save $100 million on a new North Sea oil-field development called Catcher.
Oil giants like BP, PLC, and Royal Dutch Shell PLC are also said to be big winners in the wake of Brexit, with share prices jumping to 14-month highs since the vote after declining along with oil prices for the past two years.
Moreover, the Wall Street Journal notes that the falling pound "makes it cheaper for North Sea-focused companies to pay back some of the debt they took to launch expensive projects."
While Brexit has undoubtedly rattled markets, analysts inclined to take a longer view, such as Dominick Chirichella, senior partner at the Energy Management Institute, believe there is no cause for panic; he recently stated, "There is no indication that the global financial markets are anywhere near a meltdown as we saw in 2008; the UK will not collapse, and the EU will not collapse anytime soon."
