Economic Report 2013
Figure 22: Relationship between Exploration Drilling and the Oil Price
Furthermore, the period 2009 to 2012 saw a decoupling of the relationship between the oil price and the number of exploration wells drilled. During this period, the number of wells drilled was consistently below average, despite a generally high oil price. It is evident that exploration drilling is responsive to both oil price and fiscal shocks. Figure 22 shows that there was almost no time lag between the sudden increases in tax rates of 2002, 2006 and 2011 and the fall in drilling figures; exploration capital is very mobile and so can be quickly moved to other parts of the world. by Oil & Gas UK indicate a positive outlook for 2013 to 2015, with operators forecasting a potential of 37 exploration wells to be drilled in 2013. Despite a tightening rig market, roughly 85 per cent of exploration wells and 100 per cent of appraisal wells to be drilled this year have secured firm rig slots, providing additional confidence in the forecast. Exploration activity is expected to peak in 2014, with 53 wells forecast to be drilled. Even if 80 per cent of these are drilled, 2014 would see the highest rate of exploration since 2008. b) Exploration and Appraisal Expenditure E&A expenditure typically corresponds to the number of wells drilled, but is also directly linked to the rise and fall of the international drilling rig market (see figure 24 opposite). In 2009 and 2010, a similar number of wells were drilled to 2006, but the amount spent was nearly double, demonstrating an escalation in costs. Then, in 2011, the number of wells drilled decreased, despite a further increase in expenditure. The rise in expenditure in 2012, though, was mainly due to an increase in exploration drilling compared with 2011. It is anticipated that there will be a further increase in expenditure in 2014 to nearly three times as much as was spent in 2011. Encouragingly, surveys conducted
120
Total Exploration Wells
100
Oil Price (2012 Money)
20 Total Exploration Wells Drilled/Oil Pri c e ($/bbl) 40 60 80
Financial Crisis - Decoupling of the
Relationshipbetween Oil Price and Drilling
Tax Increase
Small Field Allowance Increased
Small Field Allowance Introduced
Tax Increase SCT Introduced
Tax Increase
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Source: Oil & Gas UK, Wood Mackenzie, EIA Source:Oil&GasUK,WoodMackenzie,EIA
Figure 23: Forecast of Exploration and Appraisal Drilling
Source: DECC, Oil & Gas UK
30
ECONOMIC REPORT 2013
Made with FlippingBook - professional solution for displaying marketing and sales documents online