Oil & Gas UK Economic Report 2014

How Should Maximum Economic Recovery of Resources Be Achieved? A variety of plans and initiatives are in place with the aim of achieving maximum economic recovery of oil and gas from the UKCS. If the full 6.6 billion boe of sanctioned reserves are to be recovered, production efficiency will need to improve to ensure that fields are not closed and decommissioned prematurely. There are further resources trapped inside these fields that are not currently considered recoverable, even with established methods for improved oil recovery (IOR) 6 . However, with evolving techniques for enhanced oil recovery (EOR) 7 , reserves to be extracted from existing fields could increase. New technology will play a crucial role, as it has done throughout the life of the UKCS. There have been various examples of how technical advances have helped to develop fields over 20 years after their discovery. Oil & Gas UK is aware of more than 150 projects that are seeking investment and have yet to receive sanction; it is important these are brought through to development. A high, stable oil price has provided the right background for this investment, but, without significant advances in technology over the past ten years, the development of fields such as Stella, Cygnus, Mariner and Kraken would not have been possible. Assuming the UKCS remains an active region for exploration for another 20 years, total volumes discovered will need to average 150 million boe per year in order to find Oil & Gas UK’s low estimate of three billion boe of YTF resources (as shown in Figure 7). This is significantly larger than is being discovered currently (see Exploration and Appraisal Drilling on p42). An Exploration Task Force

under PILOT (see Section 5) is examining the reasons behind the shortfalls in E&A drilling and its poor success rate. Exploration potential remains in all the main areas of the UKCS, most significantly carboniferous gas in the southern North Sea (SNS), ultra-high pressure, high temperature reservoirs in the central North Sea (CNS), heavy oil in the northern North Sea (NNS) and deep water oil and gas to the west of Shetland (WoS). The rate of decline in production slowed to just eight per cent in 2013, a significant improvement on the 19 per cent and 15 per cent experienced in 2011 and 2012, respectively (see Figure 8 opposite). As a result, the UKCS produced an average of 1.44 million boe per day (mboepd) during 2013, or 524 mboe for the whole year. This comprised 315 mboe of liquids (oil and natural gas liquids (NGLs) – 60 per cent of the total) and 209 mboe of gas (40 per cent). Production of liquids and gas was nine per cent and six per cent lower, respectively, than in 2012. The slowing in the rate of decline in production during 2013 was largely because 13 new fields came on-stream, including Jasmine, a large condensate field, and there was significant incremental investment in existing fields, as well as notable improvements in production from large fields such as Buzzard and Bruce. Existing assets produced 11 per cent less, which reflects the natural decline of reservoirs in a mature oil and gas province, partly offset by the positive effects of incremental (or brownfield) investments. Figure 9 opposite illustrates the changes in production between 2012 and 2013. Production

6 See Appendix b for an explanation of the three main phases of recovering oil from a reservoir. 7 See Section 5 for more details about EOR.

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ECONOMIC REPORT 2014