* 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 EnQuest shutting fields)
By Shadia Nasralla
LONDON, March 19 (Reuters) - Britain's oil and gas sector
needs government help to survive, industry body OGUK said, after
the oil price crash triggered by the coronavirus and a
Saudi-Russian price war threatens its ability to continue
producing hydrocarbons in the North Sea.
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.
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 survival for 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 without
elaborating on the nature of any such deal.
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.
Oil and gas companies have 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.
The British North Sea, home of the Brent crude stream that
underpins global oil prices, is one of the most expensive places
to produce oil.
At prices of $40 a barrel and 25 pence per 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 about 1.2 billion pounds
($1.38 billion).
Producers worldwide have cut spending and dividends as
benchmark oil futures have slid towards what could be their
worst quarterly fall since the 1980s.
Some companies 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 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.
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 Barbara Lewis and David Goodman)
