* OGUK expects more insolvencies
* At $35/bbl OGUK sees basin's negative cashflow at $1.4 bln
* Maintenance schedules under review
* EnQuest shuts Heather and Thistle/Deveron fields
(Adds background, further comments, breakeven figures)
By Shadia Nasralla
LONDON, March 19 (Reuters) - Britain's oil and gas sector
called on the government on Thursday to help it survive, as an
oil price crash triggered the first field shutdowns in the North
Sea, home of the Brent crude stream that underpins global oil
prices.
As Saudi Arabia and other low cost producers including
Russia are flooding the market with oil, higher cost energy
producers worldwide, like those in the North Sea, are under
pressure with prices falling below breakeven points.
EnQuest became the first British producer to shut
North Sea fields in the wake of the oil price slump to
17-year lows, saying it will not restart its Heather and
Thistle/Deveron fields.
Oil and gas producers worldwide have cut spending and
dividends and some warned this would lead to shrinking future
output as benchmark oil futures have slid towards what could be
their worst quarterly fall since the 1980s.
Britain has 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.
But industry body Oil and Gas UK's (OGUK) Market
Intelligence Manager Ross Dornan said it was not clear how its
members could access the government help and it might not be
enough.
"We are likely to see more insolvencies and consolidations
in the market," Dornan said.
In the longer term, he said the industry was looking for
further support from the government in terms of a sector deal.
At prices of $40 a barrel and 25 pence per therm for natural
gas, 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 about 1.2 billion pounds
($1.38 billion).
Dornan added that 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.
SUPPLY SURPLUS
Oil and gas companies have already been struggling to
attract investors because of the shift away from fossil fuel,
including the British government's aim for net zero carbon
emissions by 2050.
Greenpeace UK chief John Sauven said there was no question
oil workers deserved government support.
"(But) we must avoid the mistakes made in the financial
crisis. Any bailout has to be tied to keeping people in
employment," he said.
"The government must (...) avoid the cost of the health
crisis exacerbating the climate crisis. The best remedy to both
is pumping money now into the low-carbon transition to offer oil
workers a clean-energy future.”
The British North Sea produced about 1.7 million barrels of
oil equivalent per day last year, equal to about half of
Britain's gas and three quarters of its oil product needs.
Dornan said that lower activity and investment might
ultimately lead to lower output from the North Sea basin, 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.
In the current oil supply surplus, millions of barrels
worldwide are being pumped into storage, but once storage
capacity is exhausted, producers will have no choice but to cut
production.
Maintenance work, including at the Forties Pipeline System
central to 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 David Goodman and Elaine Hardcastle)
