Economic Report 2016 - Oil & Gas UK

Figure 24: Undeveloped Reserves in Company Plans and Associated Capital Expenditure

1

Brownfield Greenfield Capital Expenditure (2015 Money)

70

7

2

60

6

50

5

3

40

4

30

3

4

20

2

Remaining Reserves (Billion boe)

10

1

Capital Expenditure (£ Billion - 2015 Money)

5

0

0

2010

2011

2012

2013

2014

2015

2016

6

Source: Oil & Gas UK

The amount of capital investment required to develop unsanctioned opportunities in company business plans has halved over the last 12 months from almost £60 billion in 2015 to just over £30 billion this year. This is in part due to there being fewer opportunities that companies are willing to consider and the scope of some projects having narrowed. Even on a like-for-like basis, development costs are beginning to deflate in response to weaker market demand. Company plans show that like-for-like pre-sanction opportunities are now forecast to be around 25 per cent cheaper to develop on a unit basis than they were 12 months ago. Furthermore, the forecast unit development costs of the five new fields approved in 2015 were, on average, 20 per cent lower than the eight new fields approved in 2014. Although this draws on a small sample of fields of varying technical difficulty and size, it does provide further evidence to support the assertion that development costs are falling.

7

8

9

10

11

37