PRINT THIS PAGE 3i examines the prospects for North Sea oil and gas
02/11/2005. Source:3i.
Since 3i last published a report on 'The prospects for North Sea oil and gas' in 2004 there have been some significant developments. From a private equity viewpoint the key dynamics include; sustained high oil prices; large fall in new, small oil companies seeking North Sea position; big opportunities remain for novel hybrid oil and gas/service/investor solutions; sharp improvement in prospects for UK-based oil and gas supply chain; while Norway is emerging as a place for private equity to invest in supply chain opportunities. The new 3,000 word report examines the widespread changes that have taken place across the industry since the The Prospects for North Sea Oil and Gas Challenge and Opportunity in a Maturing Provinceš was published last year.
The report looks at the very latest issues affecting the industry from service companies and independents through to the majors and super majors operating in the North Seašs UK and Norwegian sectors.
Including input from companies such as Vetco International, CH4 and RBG, the report analyses the key trends that are transforming the North Sea oil and gas sector today - trends that have major ramifications for the majors, independents, contractors and European governments. It identifies five issues that create opportunities and challenges for the hydrocarbons industry and for investors:
A slowdown in UK exploration and production mergers and acquisitions activity, driven by sustained high oil prices
A large fall in companies looking to enter the North Sea with a switch to areas of greater geo-political risk
The need for new business and technical solutions to unlock financially stranded North Sea assets
A sharp improvement in prospects for supply companies with necessary strategic consolidation
The emergence of Norway as a country for private equity investment
3išs head of oil and gas, Graeme Sword said, that with an estimated 28 billion barrels equivalent of oil and gas and a time horizon out to 2050 at least, the UK North sea oil reserve is just past half time and this represents a fantastic long-term opportunity for companies. He points out that broad-based confidence has recently returned to the wider North West Europe Continental Shelf, as evidenced by 70 exploration and appraisal wells predicted for the UKCS this year and 40 for Norway.
However, with the price of oil now predicted at approximately $50 for the rest of the year, potential new entrants are finding it much harder to get a toe on the asset ladder.
"Big oil companies are generating great returns. However, the smaller, private companies face challenges to acquire assets on the exploration and production side, while on the service side margins are still tight, even though oil prices are sustained at a high level," said Mr Sword. "These sectors of the industry have to deliver new ideas, technologies and business models if they are to make the most of any opportunities. Private equity is a critical source of both financing and knowledge, but perhaps, more importantly, we offer access to business networks, industry expertise and the experience of value creation. The North Sea has changed rapidly over the last few months. We are in a completely different landscape now and how to take advantage of that change is taxing all parties. However, if we get it right, there is a brilliant adventure ahead for all of us."
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