The multinational oil companies are jeopardising the UK's "energy security, and possibly future wealth" by their reluctance to invest at higher levels, according to the Royal Bank of Scotland's UK Oil and Gas Output index, published yesterday.
Despite near-record investment in the past year, it has failed to reverse the year-on-year decline in North Sea oil and gas production.
The survey also noted the upward trend in monthly output changes came to an abrupt end in May, delivering further evidence that the underlying longer-term decline will not be stemmed, said the survey.
According to Thorsten Fischer, an economist with Royal Bank: "Energy security is a strategic issue. Most of the world's proven reserves are located in politically volatile regions around the globe. High oil prices and strong demand growth along with maturing fields in the North Sea and the US have brought about a shift in the balance of power in favour of state-controlled national oil companies, or NOCs. Since NOCs lack the expertise to boost productive capacity, there is scope for multinationals to co-operate.
"However, NOCs are increasingly demanding access to western technology and insist on increasing local input. In order to do business, multinationals would have to be prepared to assume significant legal and political risks.
"On the other hand, multinationals unwilling to step up co-operation with NOCs risk missing out on the most profitable deals. Failure to develop the most readily available resources because it is deemed too risky would be detrimental to energy security, and possibly future wealth."
The survey showed that combined average daily oil and gas production was at 2,648,809 barrels of oil equivalent per day in May, down 4.5% compared to the previous month while annual production fell 7.5%.
Oil production was down 1.9% on the month at 1,346,419 bpd, and down 8.8% on the year. UK natural gas production decreased 7.1% to 7398 million standard cubic feet per day, compared to April and fell 6.2% on the year.
The Royal Bank of Scotland Oil and Gas Index decreased 5.6 basis points compared to April to 118.0 Brent crude oil averaged $67.41 per barrel in May, down $0.12 per barrel on the month and down $2.46 on the year, equivalent to a decrease of 3.5%.
Due to the higher exchange rate sterling prices fell by 9.2% to £33.97 per barrel over the year. The current price of Brent crude is $75.74 per barrel.
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