https://www.bloomberg.com/news/articles/2018-02-26/make-room-opec-the-u-k-is-set-to-become-net-crude-oil-exporter
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U.K. output forecast to rise above 1 million barrels a day
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Nation hasn’t been a net exporter of crude oil since 2004
For all the talk of aging oil fields and shrinking production, the
U.K. is about to achieve a surprising feat: it’s on the brink of
becoming a net crude oil exporter for the first time in 14 years. To put
the milestone into context, it’s one of the key criteria for joining
OPEC.
A
handful of new projects in the North Sea that will come on stream this
year will lift the nation’s crude output above 1 million barrels a day,
according to JBC Energy GmbH, a Vienna-based forecaster. On a net trade
basis, that will soon allow overseas sales to overtake imports, the
researcher said, without specifying by how much, or when.
“There is clear potential for the U.K. to return to being a net exporter again,” JBC said in a research note.
While joining the Organization of Petroleum Exporting
Countries is almost unthinkable in reality, the potential for net
exports does highlight a rebound in U.K. crude production that once
seemed in permanent decline. Output declined for consecutive years
between 2000 and 2014, according to BP Plc, whose figures include
natural gas liquids.
The
last year Britain shipped out more crude than it received was in 2004,
according to Bloomberg calculations based on figures from the Joint
Organisations Data Initiative in Riyadh. Output of 1 million barrels a
day would exceed the average for 2017 by almost 10 percent.
OPEC’s membership statute
says that countries can only become members if they export
“substantially” more than they import -- even if the producer club did
show some flexibility in that regard to allow Indonesia to rejoin its
ranks briefly in 2015/16. More fundamentally, nations must have similar
interests if they want to join. And the U.K. doesn’t: Once processed
fuels like gasoline and diesel are counted, it’s still a big net
importer. The country’s economy is also based on financial services and
other industries that are unrelated to the production of petroleum.
North Sea Output
The
U.K. pumped an average 914,000 barrels of crude a day in 2017,
preliminary data from the Paris-based International Energy Agency show.
Last month, the nation was a net importer of crude by half a million
tons, according to JODI. That equates to about 3.7 million barrels, or
118,000 barrels a day.
North Sea production has received a recent
boost from new developments, such as BP’s 130,000 barrel-a-day Quad204
and Premier Oil Plc’s Catcher
60,000 barrel-a-day fields. BP’s Clair Ridge and Statoil ASA’s Mariner
project could add an additional 155,000 barrels-a-day when they start
production in the first half of this year, according to JBC.
It’s not unheard of for European countries to have a
relationship with OPEC. In the late 1990s until 2001, the U.K.’s North
Sea neighbor Norway sent “observers” to a number of OPEC meetings -- and the Nordic country even agreed to cut output along with the producer group in 2001. The country has since stopped the practice and declined invitations along with other non-OPEC members to the group’s gatherings.
There’s
clearly a demand for British oil from the North Sea, where global
benchmark Brent crude is produced. Refiners in the U.S. Gulf of Mexico
are now buying the most oil from the U.K. since late 2010 as they seek
to replace lost supplies from Venezuela, where output has collapsed amid an economic crisis. In addition, a Brent-laden tanker is now sailing for the U.S., which hasn’t received the grade in nine months.
Much
has changed since the U.K. last produced more than 1 million barrels a
day in 2011, said JBC analyst Eugene Lindell. Refinery consolidation has
cut the nation’s ability to process domestically by over 420,000
barrels a day.
“The combination of rising supply and ailing demand is pushing the U.K. crude balance from one of deficit to surplus,” he said.
— With assistance by Julian Lee
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