Economic Report 2016 - Oil & Gas UK

ECONOMIC REPORT 2016

Development Drilling Given that development wells are drilled with the intent of producing oil and gas, it is unsurprising to see the strong correlation (0.9) between development wells spudded and production, as shown in Figure 19. Therefore, the rate of drilling can be used as a strong leading indicator of production. The rate of development drilling held up very well through the first half of the decade, with 120 to 130 wells spudded in each of the last six years and this has contributed towards stabilising production over the last two to three years.

Figure 19: Development Drilling versus Production

350

1.8

1.6

Development Wells

300

Production

1.4

250

1.2

200

1

0.8

150

0.6

Production (Billion boe)

100

Development Wells Spudded

0.4

50

0.2

0

0

1970 1975 1980 1985 1990 1995 2000 2005 2010 2015

Source: BEIS, Oil & Gas UK

However, there has been a sharp fall in the number of development wells drilled over the last three quarters, as shown by Figure 20 opposite. Forty-two development wells were drilled in the first half of this year pointing to an anticipated fall of up to 30 per cent this year against the 129 development wells drilled during 2015. Fewer producing wells are expected to be drilled this year than in any year since the 1970s, adding to the threat of another production collapse towards the end of the decade.

Fewer producing wells are expected to be drilled this year than in any year since the 1970s.

32