Project cancellations, spending cuts, well shut-ins: the problems and dilemmas plaguing onshore oil producers have also spread to offshore. And while the effects of the Covid-19 pandemic on onshore drilling may already be wearing off here and there where drilling is cheap, they may linger for longer offshore.
Despite major progress made by oil companies in the cost department, offshore drilling often remains more expensive than onshore drilling, not least because the process of extraction is more complex. These are costs that one can’t cut or forgo. What this means in the current environment, is that offshore oil may suffer more than onshore oil.
In the North Sea, almost a third of the oil left on the UK continental shelf is no longer economical to extract, a recent study found. According to it, with Brent crude at $45 a barrel, 28 percent of the oil was uneconomical. But Brent hasn’t traded at $45 a barrel fmonths and is unlikely to reach even $40 a barrel by the end of this year if we are to believe oil analysts. This means that more oil will become uneconomical, and not just in the North Sea. read more