Economic Report 2016 - Oil & Gas UK


2016 Production and Beyond The recent upward trend in production has continued into the first half of 2016, albeit at a slower pace, with production around 5.7 per cent higher in volume terms compared with the first half of 2015. Data published by BEIS show that liquids production was up 9.4 per cent and net gas up 1.2 per cent. However, the improvement in production performance is likely to slow during the second half of this year as a busier summer maintenance season is anticipated and some recent start-ups, such as Golden Eagle, are reaching production plateau. Nonetheless, production for the year is currently forecast to be around 3 per cent higher than in 2015, in line with the rise estimated in Oil & Gas UK’s Activity Survey 26 published earlier this year. With some of the largest developments in the history of the UKCS still to come on-stream, production is expected to continue to pick up through 2017 and into 2018. However, just as this upturn in production is driven by the significant capital investment of preceding years, production on the UKCS into the next decade is dependent on companies investing in the right opportunities now. 5.5 Decommissioning

Production in the next decade is dependent on companies investing in the right opportunities now.

In 2015, 21 fields ceased production on the UKCS compared with 14 anticipated at the start of the year. On average, a further 20 fields per annum are expected to cease production over the remainder of the decade, in part due to worsening market expectations. However, many of these fields will not enter the decommissioning phase until the 2020s given the shortage in capital to carry out such activity. This could increase the average period between cessation of production and decommissioning and will be inevitably scrutinised. Nonetheless, as some of these fields do move into the decommissioning stage, this is the only area of the business where expenditure is forecast to increase. Over £1 billion was spent on decommissioning in 2015 and this is expected to reach £1.5 billion this year before increasing further to around £2 billion in 2017. The outlook beyond 2017 very much depends on the industry’s ability to manage its ageing assets so that they remain economically viable even if low prices prevail. Late-life asset management and decommissioning offers scope for the UK supply chain to diversify into one of the few growth markets and establish a global centre for excellence in this area. Industry and the regulator also have a real opportunity to co-operate to ensure that this phase of a field’s life is carried out as efficiently and cost-effectively as possible with the principles of MER UK in mind.

26 Oil & Gas UK's Activity Survey is available to download at


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