Activity Survey 2014

Exploration drilling has been on a downward trend since it first fell sharply in 2009 due to the collapse in oil price and the financial crisis which impacted the exploration and production sector. There was a further sharp fall in 2011 coinciding with the increase in the Supplementary Charge (SC) rate. Drilling activity is yet to recover. Over the last five years from 2009 to 2013, an average of 20 exploration wells have been drilled per year; this contrasts with the period from 2005 to 2008 when an average of 37 exploration wells per year were drilled. Furthermore, 2011 and 2013 saw the lowest and second lowest numbers of exploration wells drilled, respectively, since drilling began on the UKCS in the 1960s. If this low rate of exploration drilling continues, the UK will recover only a fraction of the YTF resources on the UKCS and many assets will be prematurely decommissioned for want of new production.

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Figure 8: Exploration Drilling versus Oil Price

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120

Exploration Wells Oil Price (2013 Money)

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100

80

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Financial Crisis -­‐ Decoupling of the

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Relationship between Oil Price and Drilling

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40

Tax Increase

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Exploration Wells Drilled / Oil Price ($/boe)

Small Field Allowance Introduced

Small Field Allowance Increased

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Tax Increase SC Introduced

Tax Increase

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: Oil & Gas UK, DECC, EIA

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