OIL giant Equinor has started production from a field in the UK North Sea amid predictions the crude price could increase significantly in coming months.
The Norwegian firm has produced first oil from the Barnacle field East of Shetland in time to benefit from moves by major exporters led by Saudi Arabia to boost the market.
Members of the OPEC exporters organisation and other countries such as Russia agreed late on Friday to a significant increase in the scale of their effort to support crude prices.
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Bank of America Merrill Lynch said output curbs agreed by the so-called OPEC + could help drive the Brent crude price to $70 per barrel early next year, from around $64/bbl yesterday.
In a BofA Global Research the bank suggested a pick up in global economic activity or small trade deal between the US and China could also provide support for prices.
The bank appears to be taking a more bullish line on the outlook for prices than earlier this year. In June it cut its forecast for Brent in 2020 to $60/bbl from $65/bbl citing concern about trade wars and the outlook for growth in the global economy.
The prospect of Brent reaching $70/bbl will be welcomed in the North Sea oil and gas industry, which is still emerging from the downturn triggered by the plunge in the oil price from 2014 to early in 2016.
Firms that operate oil and gas fields slashed spending on new developments and upgrades causing pain across the supply chain.
Sentiment has been improving slowly amid the partial recovery in the crude price from late in 2016 when OPEC members agreed to production cuts.
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The start of production from Barnacle provides further evidence of the renewed willingness of operators to invest in North Sea developments.
Equinor only acquired the licence concerned last year.
With an estimated two million barrels recoverable oil held in Barnacle the field is fairly small.
It lies two kilometres from the UK-Norway martime border. Equinor was able to develop the field relatively cheaply by linking it to the Statfjord B platform in Norwegian waters.
“Barnacle delivers value on both sides of the median line by unlocking otherwise stranded resources in the UK,” said Arne Gürtner, senior vice president for Equinor’s UK and Ireland offshore operations.
“The speed and success of this development relied on innovative commercial solutions and the close collaboration between partners, regulators and authorities in both the UK and Norway. “
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Equinor has made clear that it sees significant long term potential in the UK North Sea, where it has become a major force.
In August the company started production from the 300 million barrel Mariner field East of Shetland.
Mariner was discovered in 1981 but was long thought to be too difficult to develop economically.
Equinor, which used to be called Statoil, used modern technologies to help it boost returns from Mariner.
In October last year Equinor bought the 40 per cent in the giant Rosebank find West of Shetland held by America’s Chevron, which is focusing investment on shale fields in the USA.
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Equinor has also noted the potential to make big finds off the UK.
The OPEC + grouping agreed to cuts totalling 1.7 million barrels per day, up from the 1.2m barrels per day agreed in 2016.
In addition, Saudi Arabia said it would cut a further 0.4m barrels per day.
The BofA Global Research report noted: “The Saudis will be closely watching compliance levels and will review market conditions in March 2020 … If other members are producing egregiously above their targets, Saudi may opt to boost output to its agreed quota levels.”
Equinor expects daily production from Barnacle to plateau at around 4,300 barrels of oil equivalent per day.
Neither the UK or Norway belong to the OPEC + grouping.
Brent crude fell from $115/bbl in June 2014 to a low of less than $30/bbl early in 2016.
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