UK liquids production scaled a new low in September, with output falling to 0.63 mb/d, lower y/y by 0.32 mb/d, the sharpest fall in exactly a year, on a base that was already lower y/y by 0.38 mb/d. The fall was underpinned by a heavy maintenance period, particularly that of the country's largest oilfield, the 0.2 mb/d Buzzard field. Despite the fall in output being widely expected, its scale yet again highlights the severity of the issues which the UK is currently facing, from technical problems to high decline rates. Output in September has fallen to almost half the level seen in September 2010 of 1.17 mb/d. In the year-to-September, total output has averaged 0.96 mb/d, lower y/y by 0.14 mb/d (13%). Given the delay in the restart of the Buzzard field to November, we expect October's output to have remained weak too.
Despite the end of the maintenance season and a seasonal pick up in output in Q4, we expect UK production to continue to disappoint. Even though Buzzard is back online, Nexen, the field operator, continues to suffer from periodic production issues and further problems cannot be ruled out entirely. We do not expect the pace of decline seen in September to become the new norm, but equally we do not expect any material improvement in the underlying production profile in 2013 or beyond, without a material shift in policy, technology or larger discoveries.
Meanwhile, whilst UK oil demand registered a marginal m/m increase for the 3rd month running, at 1.42 mb/d, demand still fell y/y by 0.11 mb/d (7%), although partly distorted by a strong base due to restocking last year. However, with a very warm winter last year, we would expect demand growth figures to pick up in the coming months.