Oil Depletion Realities

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North Sea gas production slumped by 25% in the second quarter and total gas and oil production fell by 16%. It was the biggest decline since records began 16 years ago.

North Sea gas production has slumped by 25% in the second quarter of the year, an alarming increase in the rate of decline that will cut tax revenues and could put more pressure on government to agree controversial shale gas developments. Figures from the Department of Energy and Climate Change (DECC) also show a 36% rise in coal imports.

The department records that the output of oil and associated gas liquids fell by 16% in the three months to the end of June, compared with a year earlier. This was the biggest decline since records began 16 years ago.

This left Britain importing 3.6m tonnes of oil in the second quarter, compared with 2.8m tonnes in the same period of 2010, even though total oil demand fell by 1.7%.

The largest fall was in the amount of gas produced from the southern North Sea, where operators have been arguing that projects may have to be shut down because of a rise in government taxes in the last budget.

In a typical year, the annual rate of gas decline has been closer to 15%.

Oil platforms in the North Sea only pumped 947,000 barrels of oil per day in July, down from 984,000 barrels per day in June and more than 1m barrels per day in May. The head of Health and Safety has warned that only one in 30 of the UK's North Sea oil rigs is in a good condition. A number of large platforms have closed for major maintenance this year.

The UK used to produce 2.7 million barrels a day but its output has been declining since 1999. This is the first time output has been below 1.0 mbpd for two consecutive months.

Welcome to the new reality!

Jim Brown

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