Economic Report 2013

Figure 24: Exploration and Appraisal Expenditure versus Number of Wells Drilled

c) Licensing Over the past 49 years, there have been 27 Licensing Rounds with the 28th Round expected to be launched in January 2014. DECC issued a total of 167 new licences covering 330 UKCS blocks in the 27th Round of October 2012. This was the largest number in the history of offshore exploration in the UK and it is anticipated that the increased interest in Licensing Rounds will help stimulate exploration activity in the years to come. Seventy per cent of all E&Awells drilled in 2012 were in acreage that was awarded in Licensing Rounds 22 to 26 (of 2004 to 2010), yet only four per cent were in acreage awarded in Rounds 17 to 21 (of 1996 to 2003). This contrast could be a direct result of the changes to licensing terms in 2002, which increased pressure on operators to fulfil certain drilling requirements within a four year time-frame. Around 17 per cent of wells drilled were in acreage obtained in Rounds 1 to 4 (of 1964 to 1972), demonstrating that companies are revisiting old and previously explored acreage using improved seismic imaging and/or prospects have become commercial because of the proximity of surrounding infrastructure. Constraints on access to finance for smaller companies and a tight drilling rig market have heightened uncertainty and pushed companies to develop lower risk opportunities that have a number of infrastructure options. Only nine per cent of wells drilled in 2012 were in acreage awarded in Rounds 5 to 16 (of 1976-1995), raising the question of whether or not the acreage awarded in those Rounds has been fully exploited to date.

120

2,500

Seismic

Appraisal

100

2,000

Exploration

Number of Wells (Right Hand Scale )

80

1,500

60

1,000

40

Total Expenditure (£ Million)

500

20

Number of E&A Wells Drilled Including Sidetracks

0

0

2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Oil & Gas UK Source:Oil&GasUK

Figure 25: Drilling Activity in 2012 by Licensing Round

Source: DECC, Oil & Gas UK

The Road to 2040

Since production peaked in the year 2000, the offshoreoil andgas industry intheUKhasentered a mature phase and its outlook has changed. In

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ECONOMIC REPORT 2013