PwC: ‘uneven recovery could see $60-$70 oil’

PwC: still “significant potential in the North Sea"

(Updated) — A new report from PwC on the oilfield services (OFS) sector predicts an “uneven” recovery that could see oil prices reach a “robust” $60-$70 a barrel in the next few years.

It said however that the OFS industry is unlikely to witness a return to a boom period as prices recover.

The report called ‘A Sea Change: Emerging from a downturn’ said: “There is a sense that a balancing of industry fundamentals is approaching which should support a limited oil price recovery.

“And while we are unlikely to see $100/bbl prices returning in the near to medium term at least, a more robust price in the $60-$70/bbl should be realised in the next few years.

“This will trigger an increase in upstream capex spending and broader activity levels which in turn will improve the fortunes of the OFS sector.”

However, the report added: “But this recovery will be uneven.

“Moreover, we are unlikely to witness a return to the boom period as prices recover.

“Operators are in cost reduction mode, and are embedding a culture that ensures the business model is more resilient at lower prices.

“This will mean the OFS sector has to adapt its own business to this new reality.

“It is essential therefore that OFS companies maintain their focus on cost reduction, but with one eye on the future.

“Those players that can operate efficiently and profitably in the current environment, while investing in core business areas for future growth, will be the fittest to emerge from the turmoil and most likely to reach for the stars.”

A report earlier this year by PwC on the future of North Sea oil and gas concluded that there was still “significant potential in the North Sea” but that “a number of fundamental issues will need to be addressed in the next 24 months if the basin is to avoid a rapid and premature decline.”

PwC’s earlier report said the North Sea is still “an exciting prospect play with potentially 20-30 billion boe (barrels of oil equivalent) of undiscovered resources — particularly west of Shetland and in the Atlantic Margin.

But it warned: “Whilst many believe in the future potential of the basin, this is tempered with the view that the window of opportunity to take advantage of that potential, is short and closing.

“There is a sense of urgency in the industry, a feeling the sector really has only one more cycle left and one last wave of success.

“Moreover, the clock is ticking as to when these changes need to be implemented before we see the North Sea decline at a far greater rate of knots than it should do.

“However, that all said, if managed correctly, the North Sea can still provide a few more decades of production and activity.”

PwC said that since the UK Continental Shelf Act came into force in 1964, more than 4,000 wells hade been drilled at a cost of more than £50 billion — and more than 45 billion barrels of oil equivalent have been produced to date.

“Depending on who you speak to, there is suspected to be somewhere in the region of 20-30 billion boe of resources remaining and still to be exploited,” said PwC.

“Considering the last number, it is no surprise that all other things being equal, the future of the basin can be measured in decades.

“And that does not even take into account what might be achievable with advances in technology and innovation, as we seek to maximise the economic recovery from the basin.”