UK liquids production continued a decade and a half long fall, with output in August dropping below 1 mb/d once again. At 0.99 mb/d, total production was lower y/y by 32 thousand b/d, with crude output virtually flat y/y. While on the face of it, the data seems to suggest that the steep declines seen in UK's oil production over the past few years may be stalling somewhat, it is worth noting that output in July last year had fallen further relative to the already weak base of 2010. Indeed, this year's output in July is almost 0.5 mb/d lower compared to July 2009. The key UK oilfield, Buzzard, has been fraught with technical problems since March last year and though it returned to normal rates towards the end of last year, glitches regular appear. With Nexen, the field's operator, carrying out a six week maintenance this month and next, we expect output in September and October to test the multi-decade lows reached last August. Overall, the UK's oilfields continue to grapple with extremely heavy decline rates and years of underinvestment.
Because discoveries of new oil and natural gas reserves have not outpaced the maturation of existing oil and natural gas fields, the country has had to increase its reliance on imported natural gas and oil. While the government has developed energy policies to focus on enhanced oil and gas recovery, continued giving tax breaks to the oil fields, and increased cooperation with Norway, its largest oil supplier, few improvements have been seen. We expect the UK's oil production to continue declining by 0.1 mb/d, y/y, in the remainder of 2012 and in 2013.