Economic Report 2013

Brent had lengthy maintenance shutdowns, Goldeneye ceased production in preparation for its role in a carbon capture and storage project, Rhum had been shut for geopolitical reasons (and remains so) and Gryphon’s floating production, storage and offloading (FPSO) vessel had to undergo substantial repairs following damage in bad weather. Fortunately, 93 fields increased their output relative to 2010, which meant that the net decline for 2011 was 413,000 boepd. In 2012, 239 fields produced 470,000 boepd less than in 2011. This decline was dominated by ten fields which eclipsed the positive contributions made by the 82 fields that increased their output. A gas leak at Elgin in the central North Sea (CNS) during March and the subsequent closure of the SEAL pipeline had a substantial effect on production for the year; the seven fields feeding into the SEAL pipeline, including Shearwater, produced 126,000 boepd less than in 2011, or 41 per cent of the net decline between 2011 and 2012. The fields that increased production were a mixture of existing and new ones. Nine fields started production in 2012, although with relatively modest total reserves of 146 million boe. These included Islay, Wingate, Bacchus and Devenick, but their impact was too small to offset the decline from existing fields. This offsetting effect would have been larger had the dates for the start of production not been later than anticipated for some fields. The

likely reasons underlying the limited reserves brought on-stream in 2012 are the poor results from exploration drilling in recent years and an unexpected tax increase in 2006, with its adverse effects on investment. Some key fields, such as Buzzard, emerged from lengthy, planned maintenance periods and provided a timely boost to production in 2012. Meanwhile, the Sean gas field increased its output as it came to the end of its production contract which had previously kept it in a reserve role. In 2013, there are 15 fields anticipated to come on-stream (with combined reserves of 470 million boe). As Oil & Gas UK forecast in February, production in 2013 has continued to decline and, using the latest available data (to the end of May), the indications are that it is towards the bottom of our predicted range, namely 1.4 million boepd. If this rate were maintained for the rest of the year, production would be 8.5 per cent lower than in 2012. However, maintenance is concentrated in the summer months and so, although the decline will be offset in part by the return to production of the Elgin and Franklin fields and Banff and Gryphon FPSOs and by new production coming on-stream, notably the Jasmine field in the fourth quarter of the year, Oil & Gas UK’s updated forecast is for production to be in the range of 1.2 to 1.4 million boepd for 2013 overall (see figure 10 opposite).

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ECONOMIC REPORT 2013