Economic Report 2013

If companies invest in projects which they deemto have a greater than 50 per cent chance of being developed (‘probable reserves’), as is reasonably expected with the passage of time, a further 2.5 billion boe of oil and gas will be recovered. Additionally, there are resources with, currently, a less than 50 per cent chance of being developed (‘possible reserves’). These account for a further 1.5 billion boe, although many of these projects are technically difficult and/or marginal in commercial terms, hence their classification as ‘possible’. The total resources in companies’ plans, ranging from producing fields to possible new or brownfield developments, is 11.4 billion boe. The latest figures from the Department of Energy and Climate Change (DECC) show a range for potential additional resources (PARs) of 1.5 to seven billion boe and yet-to-find resources (YTF) of six to 17 billion boe. However, Oil & Gas UK has taken a more conservative position, reflecting the uncertainties in these ranges, and believes it is more prudent to consider PARs in the range of one to four billion boe and YTF resources of three to nine billion boe. The forecast of total

UKCS reserves and resources, as at the end of 2012, is depicted in figure 7. While it indicates the potential range in each category, caution is required in its interpretation and it should not be assumed that the top of each range will be achieved. None of these can be realised without substantial expenditure. If the 11.4 billion boe in companies’ current plans are to be realised, around £300 billion (in today’s money) will be required: • £100 billion of capital investment to develop both green- and brown-fields. • £160 billion to operate these assets throughout their productive lives. • £35-40 billion to decommission them after production has ceased. Significant additional investment will be required if PARs and YTF resources are to be recovered from the UKCS. This is because of the need for further extensive exploration and the fact that unit costs of development and operation are now approaching £30/boe as reserves become more difficult to extract.

Figure 7: Forecast of UKCS Reserves and Resources (as at the end of 2012)

30

25

Yet To Find 3-9 bln boe

20

Potential Additional Resources 1-4 bln boe Possible Reserves 1-3 bln boe Probable Reserves 2-4 bln boe

15

10

5

Existing Fields and Sanctioned Investments 7.4 bln boe

Reserves / Resources (Billion boe)

0

Source: DECC, Oil & Gas UK

Produced in 2012

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ECONOMIC REPORT 2013