New U.K. Gas Fields Ramping Up Output to Ease Crisis
(Bloomberg) -- U.K. natural gas production could get a much-needed increase from the start of two new North Sea projects, providing some relief to the region’s strained energy system.
Royal Dutch Shell Plc’s Arran development and NEO Energy’s Finlaggan field both started flowing gas in recent weeks. At least two more North Sea project launches are scheduled this year, with Harbour Energy Plc’s Tolmount field expected around year-end, and IOG Plc’s Phase 1 venture in the fourth quarter.
Even a small addition to the U.K.’s domestic output is good news for the country, where a supply crunch pushed gas and power prices to unprecedented highs. High energy costs are compounding concerns about inflation and adding to the rising overheads businesses across Europe are already shouldering for raw materials.
U.K. gas output tumbled earlier this year amid heavy pipeline and field maintenance and as the pandemic forced companies to defer new projects.
Volumes started to recover in the second half and should rebound next year with North Sea producers keen to capitalize on record prices, consultant Wood Mackenzie Ltd. forecast last month. With new projects slated in coming months, U.K. production in 2022 could reach 35 billion cubic meters, compared with just over 27 billion forecast for this year, WoodMac said.
NEO Energy confirmed production had started at Finlaggan, but declined to comment on current volumes. Shell declined to comment on the Arran project, though co-owner Viaro Energy said earlier this month that output had started. Both developments had been delayed by Covid-19 restrictions.
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While the new fields provide some supply relief, longer-term prospects are unclear with new developments facing pressure amid climate debates. Earlier this month, Shell’s Jackdaw gas and condensate development failed to get required environmental approval from the U.K. regulator and is now weighing changes to the project.
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