Activity Survey 2015

ACTIVITY SURVEY 2015

6.5 Capital Investment Capital investment in the UKCS reached £14.8 billion in 2014, surpassing the forecast for this year of £13 billion and the record breaking £14.4 billion spend of 2013. With little new activity sanctioned last year, this rise was primarily a result of cost over-runs and project slippage on ongoing new developments. This effect is clearly shown by the fact that around half of total capital investment last year was spent on just 12 fields, all of which were sanctioned prior to 2014.

Figure 31: Capital Investment by Field in 2014

16

14

Half of 2014 Capital Expenditure was Invested Across 140 Fields

12

10

8

6

Half of 2014 Capital

4 Capital Expenditure (£ Billion)

Expenditure was Invested in Just 12 Fields

2

0

2014 Capital Expenditure by Field

Source: Oil & Gas UK

Investment Outlook The surge in investment seen from 2010 to 2014 was largely driven by the high oil price and bespoke field allowances. Over the next two years, sanctioned investment is set to halve as many of the high spend fields reach development completion and move into production, unless new investment can be encouraged. Capital investment is expected to be no more than £11.3 billion in 2015 and is predicted to fall to less than £8 billion in 2016. Whilst investment over the next two to three years will be held up by the ongoing development of previously sanctioned projects, the current cost and price base facing the industry, alongside an outdated fiscal regime, could lead to capital investment falling to as low as £2.5 billion by 2018 if no new investment is sanctioned in the meantime. There must be swift action to secure new investment for the long term.

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