Economic Report 2016 - Oil & Gas UK

Ongoing investments in existing development projects, most of which were sanctioned when the oil price was higher than $100/bbl, will hold annual investment up to at least £5 billion in 2018 but the longer term trend remains negative. With most potential new developments requiring a break-even oil price in excess of $50/bbl, companies are re-evaluating development concepts to achieve significant cost savings before committing to new projects. This project slippage may present some upside on the forecast towards the end of the decade but only if market conditions improve.

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Figure 22: Capital Investment

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Potential Upside from Projects yet to be Sanctioned

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Committed Investment

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Capital Investment (£ Billion - 2015 Money)

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2012

2013

2014

2015

2016

2017

2018

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Source: Oil & Gas UK

Figure 23 overleaf shows that only one new field has been approved so far in 2016 at the time of writing, with less than £100 million of fresh capital committed to the basin. With few projects approaching sanction, it is possible that there will be no further commitments to investment in greenfield projects this year. This is set to be the worst year in the history of the UKCS for new field approvals. Brownfield opportunities are also scarce with just five addendums to field development plans sanctioned so far and few expected for the rest of the year. This is compared with ten in 2015 and 28 in 2014.

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Less than £100 million of fresh capital has been committed to the basin so far this year.

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