Low gas prices delay U.K. field development

Weak gas prices have caused delays (21099 bytes) of 1-2 years in development of four U.K. North Sea gas fields, says Wood Mackenzie Consultants Ltd., Edinburgh. The fields had been expected on stream in the next 3 years. The analyst said although Britain currently has a surplus of gas, 22 offshore projects with gas reserves have received development approval in the last 18 months. "Weak prices at the beach, driven by weak prices at the burner tip, finally appear to be influencing upstream

Aug. 21, 1995

2 min read

Weak gas prices have caused delays (21099 bytes) of 1-2 years in development of four U.K. North Sea gas fields, says Wood Mackenzie Consultants Ltd., Edinburgh.

The fields had been expected on stream in the next 3 years.

The analyst said although Britain currently has a surplus of gas, 22 offshore projects with gas reserves have received development approval in the last 18 months.

"Weak prices at the beach, driven by weak prices at the burner tip, finally appear to be influencing upstream development plans," Wood Mackenzie said.

Although few, these delayed developments point to the realization that more gas fields will only worsen producers' problems of low beach prices for their gas, the firm said. The result will be lower returns than originally expected on upstream projects.

Short term gas packages of gas are trading for 1 ($1.60)/MMBTU compared with 2.50 ($4)/MMBTU 11/2 years ago.

Longer term life of field gas purchase deals struck during the past 18 months also have seen some price softening, from about 1.70-1.80 ($2.72-2.88)/MMBTU to 1.50-1.60 ($2.40-2.56)/MMBTU.

Each of the fields with deferred development plans were to have been satellites of existing platforms: Hunter to the Murdoch field platform, Kingfisher to Miller, Millom to North Morecambe, and Viking Fs to Viking B.

Wood Mackenzie said, "Since these fields have relatively advanced development plans, it is likely they will stay in-line as the next gas developments for each operator. That implies other gas field prospects may be delayed in turn."

The firm's data show 19 U.K. fields, with estimated reserves amounting to almost 8 tcf, under development and likely to add more than 2 bcfd to gas production by 1998.

Nine field development projects due on stream this year will add about 700 MMcfd of productive capacity, or 10% of current market demand.