Oil price slump to hit East Anglia energy sector
Plunging oil prices will have a damaging effect on the region's energy sector, but the impact will be more keenly felt in Scotland, industry experts have warned.
Producers look set to cut hundreds of jobs and slash wages after moving to take new investments off the table when the price of oil fell to 60 US dollars (£38) a barrel.
It is feared that some supply chain companies in East Anglia could be hit in the fallout because of their close connections with Aberdeen – an epicentre for North Sea oil production.
But while the oil price has slumped, gas prices remain 'relatively favourable' and provide 'great opportunities' for investment, according to Independent Oil and Gas Plc, which is increasing its gas resources off the east coast of England.
James Brabben, researcher at Norwich-based Cornwall Energy, believes the low oil prices will last well into next year.
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'Exploration and production in the UK has been occurring with 90 to 100 US dollars a barrel in mind and the recent drop in prices, by over 40pc to around 60 US dollars a barrel, will impact these activities,' he said.
'Locally, companies will have based their assessments of potential production sites on 90 to 100 US dollars barrel and in the current climate these projects may be unviable'
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'The levels of global oversupply in the market suggest low prices could persist for much of 2015 and potentially beyond if supply and demand fundamentals do not change substantially'
He added 'The supply chain for oil and gas is so interlinked in the UK, Aberdeen and Great Yarmouth especially, that it will have an impact down here as well.
'In some cases, oil and gas is extracted from the same fields, so you will have the same workers working on the same projects.'
ConocoPhillips is cutting 230 out of 1,650 jobs in the UK, Goldman Sachs predicted big oil firms would have to cut capital expenditure by 30pc to restore their profitability and Schlumberger cut back its UK-based fleet of geological survey ships.
Simon Gray, chief executive of the East of England Energy Group, said: 'Yes there is concern, but from a consumer perspective it means we are seeing cheaper domestic fuel.
'And it is good for industry. If the energy costs go down then our manufacturing costs go down, and that makes us more competitive within the international market.
'However, the impact from the falling oil price on the energy sector in the east is not so great because we are focused on the southern North Sea gas basin.
'One of the main operators in the southern North Sea is Perenco, and they are privately owned and don't have a share price to worry about, unlike other big oil companies.
'It will not be nearly as bad in the east as somewhere like Aberdeen.'
Chief Secretary to the Treasury Danny Alexander described the recent slump as 'a big concern' but insisted the North Sea is 'open for business' and backed by government support for decommissioning, investment and exploration.
Mark Routh, chief executive and interim executive chairman of IOG, said the current environment was still providing great opportunities.
'This is the right time to increase the size of the commercial resources in our Southern North Sea Hub centred on the Blythe discovery and take advantage of the relatively favourable gas price environment and the falling rig rates, reducing development costs,' he said.
'We continue to pursue opportunities to acquire producing assets and to grow the portfolio by merger and acquisition activities.'
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