Oil & Gas UK Economic Report 2015

Figure 34: Exploration and Appraisal Drilling

90

80

70

Exploration Sidetracks Exploration Appraisal Sidetracks Appraisal

60

50

40

30

20 Number of Wells Drilled

10

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: DECC, Oil & Gas UK

7.4 Stimulating Exploration

oil price slumped. Over the first half of this year, seven exploration wells were drilled (with no sidetracks), plus three appraisal wells (with six sidetracks) and 38 development wells (with 27 sidetracks). It is anticipated that around 20 E&A wells will be drilled in total this year, but with rig rates and the costs of acquiring seismic at their most competitive for years there will be opportunities for those companies that have the capacity to invest in exploration in a counter-cyclical manner. There has also been a sharp decline in the volumes discovered (see Figure 35 opposite). This is a consequence of fewer wells being drilled and of companies becoming more risk averse, targeting smaller, less risky accumulations. Over the last three years, there have typically been four discoveries a year, with total recoverable reserves averaging annually around 55 million boe. As at mid-year 2015, one successful well with recoverable reserves of around 20 million boe had been reported, although the results from three of the seven wells drilled to date are yet to be reported. Further wells are planned in the second half of the year, which may lift the outcome.

The industry, regulator and government all accept that the current pace of exploration is insufficient. Key priorities are to encourage exploration and prove the basin’s resource potential. As mentioned earlier, DECC has published central case figures that suggest YTF potential of between 2-9 billion boe, depending on the perceived geological risk associated with the resources being targeted. At current drilling rates, it is anticipated that only a small fraction of these YTF resources will be discovered before the decommissioning of UKCS infrastructure curbs further exploration activity.

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ECONOMIC REPORT 2015