UK gas production faces increased downside risk

By Catriona Scott 20 December 2016
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UK gas output is set to decline as low prices, weak investment and political uncertainty threaten to increase pressure on production. (Nexen) UK gas output is set to decline as low prices, weak investment and political uncertainty threaten to increase pressure on production. (Nexen)

The UK’s upstream oil and gas sector has been going through a difficult period. Low oil prices have led to job cuts and reduced investment, while political uncertainty has added to the challenges. In the recent autumn statement, Chancellor Philip Hammond confirmed existing commitments to oil and gas tax breaks, but he did not increase them. With challenging times set to continue, UK gas production is vulnerable to an accelerated decline in production.

The UK produced around 41 billion cubic metres of gas in 2015 and is set to produce around 43 bcm this year, an increase of 5%. Output has now increased for the past two years, but the trend is expected to change next year, with a year-on-year decline of around 5% forecast. This will result in a greater volume of imports being required to meet market needs.

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