North Sea crude oil will continue to see robust demand for many years to come, according to S&P Global Platts.
The commodities data and analytics consultant, in a new report, detailed anticipated changes in the mix of oil produced in the region that spans mainly UK and Norwegian waters.
Specifically, Platts notes that North Sea crude is “getting heavier and more sulfurous”, and increasingly Norwegian.
The region’s previous mainstay of ‘light and sweet’ crude – usually represented by the Brent benchmark, named after the Brent field offshore Scotland (in 1976 to 2011) – is forecast to reduce in volume significantly to around 600,000 barrels per day from around 3mln barrels in recent times.
Light-sweet crude could still represent close to half of the region’s output though, the consultancy noted.
Platts, meanwhile, highlighted the success of Equinor’s Johan Sverdrup field in Norwegian waters where Norway’s state-backed oil firm’s heavier and more sulphurous output is proving popular with refiners in Asia and China.
Johan Sverdrup is presently around two-years old and yields near 500,000 barrels per day, ahead of expected capacity of 755,000 bopd by the end of 2022 – potentially representing over a quarter of all North Sea production by then, according to Platts.
The consultant noted that Equinor’s Johan Castberg field development, in the Barents Sea between Norway and Russia, could further boost the Norwegian firm’s volumes in late 2022.
Platts meanwhile noted that whilst Sverdrup and similar crudes are exported east, cheaper light sweet crudes have increasingly been imported from the United States into refineries following the lifting of America’s export restrictions amid the latter phase of its shale boom.
On the UK side, attention has meanwhile skewed more towards gas – partly as Britain’s energy supply issues have in recent months been more acute, and, as the country deals with both the post-Brexit energy security as well as decarbonisation, emissions reduction and ESG.
Somewhat bafflingly for many industry commentators, the UK authorities recently denied approval for a new gas field – Shell’s Jackdaw project was slated to come online by 2024 – despite soaring import prices and soaring domestic gas prices, with some experts describing the knockback as politically motivated ahead of the COP26 UN Climate Change conference which is to take place in Scotland next month.
Possible Brent shake-up
For its own purposes, Platts is now reviewing its Brent benchmark, which is the yardstick used to price around two-thirds of the world’s crude oil, and whether its benchmark price ought to be comprised of more types of crude.
Looking outwards though Platts sees some degree of positivity, or at least robustness, for the North Sea demand picture.
“The North Sea, as a reflection of the global crude sector, has been facing many shake-ups in recent years: from the rise of US shale on the supply side to changing customer preferences and energy transition pressures on the demand side,” Platts said in a company blog.
“But it is clear that demand both at home and abroad, for North Sea crude in all its shapes and forms, will remain robust for many years to come.”