LONDON, Feb. 24 (UPI) -- A bright spot in an otherwise "bleak" year for North Sea oil and gas operations was that production slipped 1 percent year-on-year, an annual survey found.
"This year's activity survey paints a bleak picture but also identifies this region's potential, emphasizing the importance of government and industry now putting the right measures in place to secure its long-term future," Oil & Gas U.K. Chief Executive Malcolm Webb said in a Tuesday statement.
A weak commodity market is starving energy companies of revenue needed to continue with robust spending programs in 2015. Despite the slump, the survey found oil and gas production slipped 1 percent year-on-year but should increase slightly to 1.43 million barrels of oil equivalent per day, provided there are no major disruptions.
Webb said the industry faces substantial hurdles moving forward, however. Without sustained investments, he said, much of the oil and gas remaining in North Sea basins may stay in the ground.
"Even at [oil priced at] $110 per barrel [last year], the ability of the industry to realize the full potential of the U.K.'s oil and gas resource was hamstrung by escalating costs, an unsustainably heavy tax burden and inappropriate regulation," he said. "At current oil prices, we now see the consequences only too clearly."
Operating expenses in the North Sea are up 8 percent while revenues for oil companies working in the region are at their lowest levels since 1998. Combined, those elements translate to a negative cash flow for North Sea operators.
A January report from analysis firm Wood Mackenzie expressed similar concerns, noting exploration activity in 2014 was off 18 percent from the previous year.
The British government last year said it was moving forward with recommendations from retired businessman Ian Wood, who found there may be an additional 4 billion barrels of oil equivalent available for recovery in the North Sea.
