Oil & Gas UK Economic Report 2014

The number of appraisal wells drilled in 2013was similar to 2012 – 29 and 31 wells, respectively. The average number of such wells has consistently been around 30 a year since the early 1990s, excluding the anomalous years of 2007 and 2008, when a high oil price was responsible for one third of all appraisal wells drilled in the last ten years (see Figure 23). There is still an appetite to explore on the UKCS. Many companies are looking to drill prospects that they had been forced to postpone in recent years due to rising rig costs and difficulties in accessing capital. However, so far, there is little sign of exploration activity increasing, with DECC reporting only eight exploration wells drilled in the first half of 2014, two fewer than in the same period of 2013. The CNS will again be the area where the majority of wells are drilled. Although, after two years of very little activity, it is

encouraging that there have already been two exploration wells drilled in the SNS area this year. Ultimately, though, exploration performance will be judged by the amount of recoverable oil and gas discovered which cannot yet be determined. The number of appraisal wells drilled is forecast to fall as a direct result of recent, poor exploration success. There are simply few new prospects to appraise on the UKCS at the moment and only four appraisal wells have been drilled in the first half of 2014. However, there have been a number of cases recently where prospects have gone straight from exploration to development, because the project’s economics simply cannot accommodate the additional cost of drilling an appraisal well. A number of the appraisal wells forecast to be drilled in the next two years are to assess brownfield opportunities or re-appraise fields that were discovered over a decade ago, but have yet to be developed.

Figure 23: Appraisal Wells Drilled, including Sidetracks

90

80

Appraisal Sidetracks Appraisal Wells

70

60

50

40

30

20

10

Number of Wells Drilled including Sidetracks

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Source: DECC

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ECONOMIC REPORT 2014