British producers pump out more oil as small explorers fill vacuum left by majors

UK oil production rose by nearly nine per cent last year, figures show, as small explorers step into a gap left by oil majors.

Oil production rose 8.9 per cent to 1.1m barrels per day while gas output dropped 3.5 per cent to 610,000 barrels per day, the Oil and Gas Authority (OGA) said.

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It comes as oil majors slowly pull out of the depleting North Sea, forsaking projects which lack the scale their business models need.

Their withdrawal also pushed up decommissioning costs, for the fourth year running, by nine per cent to £1.45bn.

However, the vacuum is leaving space for new explorers, many backed by private equity, to buy or find smaller oil fields, or squeeze the final barrels out of the larger assets which have been depleted by the majors.

The OGA also revised its forecast for future production, upping its projection by 50 per cent since its 2015 report. The new forecast, of 11.9bn barrels, is also a 200m barrel increase since the previous projection in September last year.

It predicts companies will increase capital spending by four per cent in 2019, reversing the long-term trend after four years of decline.

Trade body Oil and Gas UK’s upstream policy director Mike Tholen said: “This is a significant milestone for an industry emerging from one of the toughest downturns in memory.”

However, despite the good news, overall production is still set to decline over the long-term, the OGA said.

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Seizing on the news the Scottish National Party (SNP) called for the money from North Sea oil to be invested for the future.

“A portion of oil revenues should be invested in a fund for future generations, as most other oil-producing countries have done – something which will ensure there is a positive economic and social legacy from our oil wealth,” said MSP Maureen Watt.