Economic Report 2013

Licensing and Drilling

a) Exploration An active exploration market remains crucial to the success of the UKCS; without it, there can be no long-term future for oil and gas production. Since 2000, 358 exploration wells have been drilled, resulting in 4.1 billion boe of reserves being discovered with a median discovery size of ten million boe. Despite the high volume of reserves already recovered, the UKCS still has substantial oil and gas resources and exploration potential. Oil & Gas UK believes that between three and nine billion boe have yet to be discovered (see figure 7 on page 18). At the current rate of drilling, it is estimated that it will take some 20 years and250 to500wells toexplore for andfind these resources, the recovery of which will rely, to a large extent, on the availability of existing infrastructure.

Exploration and appraisal (E&A) drilling increased overall in 2012, with 24 exploration (14 in 2011) and 19 appraisal (16 in 2011) wells being drilled, together costing £1.7 billion. These numbers exclude sidetracks of which there were two exploration and six appraisal wells in 2012. Despite this increase in E&A drilling, the industry is struggling to reach the rates of 2007 and 2008. Exploration drilling activity, averaged over the past four years, has been the lowest for a decade, with 2011 being notably low. This can partly be blamed on the economic crisis and limited access to finance for smaller exploration companies.

Figure 19: Forecast Distribution of Yet-to-Find Resources

9%

13%

NNS

22%

CNS

SNS, Irish Sea and Celtic Basin

West of Shetland

48%

9%

West of Scotland

Source: DECC

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ECONOMIC REPORT 2013