Activity Survey 2015

ACTIVITY SURVEY 2015

Exploration and Appraisal Drilling Expenditure Just over £1.1 billion was spent on E&A and seismic activity in 2014, compared with £1.6 billion in 2013. Expenditure on exploration drilling decreased from £780 million in 2013 to £610 million in 2014, while expenditure on appraisal drilling declined from £630 million to £440 million. Operators’ expenditure on acquiring seismic data decreased to £95 million in 2014 from £150 million in 2013. Just over £40 million of this was spent on new seismic acquisitions, while £55 million was spent on seismic purchase and reprocessing. Operators forecast that they will spend £130 million on seismic acquisition and interpretation in 2015, around £50 million of which is planned to be spent on new broadband seismic acquisitions. In 2014, the average cost per exploration well was just under £44 million. Although this is lower than the peak average cost of £52 million in 2013, exploration drilling costs have risen sharply in recent years from an average of £23 million per well from 2007 to 2010 to an average of £44 million from 2011 to 2014. The high cost per well in 2013 was due to the number of technically challenging HPHT wells in the CNS region, which are more complex and therefore expensive to drill.

Figure 19: Average Cost per Exploration Well Drilled

60

50

40

30

20

10

Average Cost per Exploration Well (£ Million)

0

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Source: Oil & Gas UK, DECC

Although the average cost per well drilled has risen over the past three years, the cost of finding commercially recoverable reserves on the UKCS has increased far more significantly. The yearly average cost of finding commercial recoverable reserves has risen from £4/boe from 2009 to 2011 to £22/boe from 2012 to 2014. The finding cost is a very volatile metric and can be skewed by one big discovery within one year. The rise over the last three years has been caused more by a fundamental lack of exploration success rather than excessive growth in exploration spend.

page 32