Activity Survey 2015

ACTIVITY SURVEY 2015

Figure 4 shows industry’s key performance metrics in 2014 against forecasts made 12 months ago.

Figure 4: Key Metrics Scorecard for 2014

Forecast

Actual

Exploration Wells

25

14

Appraisal Wells

11

18

Production (Million boe per day)

1.4-1.5

1.42

Expenditure (£ Billion)

25 13 9.6 1.4 1

26.5 14.8

• Capital Expenditure • Operating Expenditure • Exploration and Appraisal • Decommissioning

9.6 1.1 1

Unit Operating Cost (£/boe)

18

18.5

Source: Oil & Gas UK

Exploration and Appraisal Drilling in 2014 In February 2014, based on operators’ forecasts, Oil & Gas UK anticipated that 36 exploration and appraisal (E&A) wells would be drilled with the majority (25) being exploration. Although 32 E&A wells were drilled, the dynamic was not as expected, with more appraisal wells drilled than exploration. Despite hopes of an upturn, exploration drilling activity failed to recover with just 14 exploration wells drilled (including sidetracks) last year. The current rate of exploration drilling is the lowest since 1965 and urgent action is required to stimulate activity in this area and generate future development opportunities. There were a number of factors that meant 11 wells failed to materialise in 2014, although nine of them are still planned but slipped into 2015 or later. The key constraints were inability to secure finance, lack of affordable rigs and cost escalation. Furthermore, exploration drilling continued to yield disappointing results. Whilst half of the wells drilled encountered hydrocarbons, only four were reported as sufficiently attractive to potentially be developed. These four discoveries contain combined recoverable reserves of around 50 million boe, which represents a third successive poor year for exploration volumes discovered, particularly when compared to the annual average of over 250 million boe over the last ten years. Ongoing initiatives to try and improve the success of exploration drilling include: plans to initiate new seismic data acquisition in the UKCS’ frontier regions; the creation of a digital exploration map illustrating new, previously unexplored and near-field opportunities; a conference for exploration specialists to share information and best practice; and a review of 97 wells in the central North Sea (CNS). In addition, the impact of the fiscal regime on exploration is being reconsidered, not least in light of the Wood Review and the recently completed fiscal review.

Appraisal drilling, on the other hand, exceeded expectations in 2014. Eighteen wells were drilled, seven more than were forecast. It is hoped that appraisal activity will encourage further resources to be matured.

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