The oil price is expected to “bounce back” from five-and-a-half year lows this year – but North Sea activity will continue to decline, energy policy experts have predicted.
Energy economics consultancy CEBR Energy said that the recent fall in oil prices “overshot” last year as Opec maintained production in the face of increasing US shale supplies.
On New Year’s Eve, oil prices fell below $56 a barrel to reach its lowest level since May 2009. Howard Archer, Chief UK Economist at IHS Global Insight, has predicted that oil will average $66 per barrel over 2015.
CEBR warned that any recovery would be “limited” unless the Saudis, the biggest partner in Opec, moved to make major cuts in output.
As a result, CEBR said that “decommissioning will be the new business in Scotland” as operators decide to shut down old North Sea assets that are no longer profitable to run.
The analysts added that any tax cuts proposed by government in the wake of falling oil prices would “not do much for new developments” as they would “not be liable for much tax anyway”.
CEBR added that there “will be no shale gas revolution in the UK”.
“As in 2014, very few wells will be drilled and the companies involved face a cash shortage,” it said.