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* OGUK expects more insolvencies
* At $35/bbl OGUK sees basin's negative cashflow at $1.4 bln
* Maintenance schedules under review
By Shadia Nasralla
LONDON, March 19 (Reuters) - Britain's oil and gas sector
needs financial help to survive, industry body OGUK said, as the
oil price crash triggered by the coronavirus and a Saudi-Russian
price war means they may be unable to keep producing
hydrocarbons in the North Sea.
Benchmark oil prices on Wednesday fell to around $25
a barrel, their lowest level in 17 years, as measures to tackle
the virus outbreak have had a drastic impact on demand.
For industry as a whole, Britain has already said it would
launch a 330 billion-pound ($399 billion) lifeline of loan
guarantees and provide a further 20 billion pounds in tax cuts,
grants and other help for businesses facing the risk of
collapse.
OGUK Market Intelligence Manager Ross Dornan said it was not
clear how OGUK members could access the government funding and
it might not be enough to ensure the survival of some of them.
"In the longer term, we are also looking for further support
from the government in terms of a sector deal," he said.
He did not give details and said it was too early to say how
much money the industry would need or whether the shift to lower
carbon energy might be an added complication.
Oil and gas companies have has already been struggling to
attract investors because of the shift away from fossil fuel,
including the British government's aims for net zero carbon
emissions by 2050.
One of the most mature basins in the world and the home of
the Brent crude stream that underpins global oil prices, the
British North Sea is one of the most expensive places to produce
oil.
At prices of $40 a barrel and 25 pence a therm for natural
gas, the OGUK said it expects its oil and gas producers to
"effectively be cash flow neutral". At $35 a barrel, the basin
would fall into a negative cash flow of around 1.2 billion
pounds ($1.38 billion).
Producers world-wide have cut spending and dividends
following a price crash that has seen benchmark oil futures on
track for their worst quarterly fall since the 1980s.
Some might not stay afloat.
"We are likely to see more insolvencies and consolidations
in the market," Dornan said.
The British North Sea produced about 1.7 million barrels of
oil equivalent per day last year.
Dornan said lower activity and investment might lead to
lower output, but not immediately.
"I think there is enough hooked-up, sanctioned resource
right now to maintain production levels at around the current
rates in the next year, 12 to 24 months," he said.
Maintenance work, including in June at the Forties Pipeline
System that is central for crude streams underpinning the Brent
benchmark, could be subject to change.
"It's a work in progress, any activities are going to be
under review," he said.
($1 = 0.8684 pounds)
(Reporting by Shadia Nasralla; editing by Barbara Lewis)
