Economic Report 2016 - Oil & Gas UK

ECONOMIC REPORT 2016

Stranded Opportunities The decline in exploration activity and lack of material exploration success means that many of the current development prospects are not new – more than two-thirds of the associated reserves were discovered before 2000. However, without a significant change in the fundamental economics of these potential projects, either driven by a rise in prices or a fall in costs, many will never be developed.

Figure 14: Development Status and Recoverable Reserve Base by Year of Discovery

6

Undeveloped

Ceased Production

5

Under Development

Onstream

4

3

2

1

Recoverable Reserves Discovered (Billion boe)

0

1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Source: Wood Mackenzie

Data provided by Wood Mackenzie indicate that up to five billion boe within known discoveries are currently considered commercially unviable for development and categorised as PARs. Around 40 per cent of these reserves are classified as unconventional, meaning the reservoir is high-pressure high-temperature (HPHT), heavy oil or in deepwater and are therefore technically challenging, requiring significant capital investment to extract. Of the conventional stranded discoveries, about 90 per cent are less than ten million boe in size and deemed too small for commercial development. More certain access to infrastructure and the cost-effective deployment of existing and new technologies will be vital to develop some of these small fields and is seen as a crucial opportunity by both industry and the OGA.

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