Oil & Gas UK Activity Survey 2016

ACTIVITY SURVEY 2016

Capital Investment in 2015 Capital investment fell by 22 per cent last year as some big capital projects reached completion and fewer greenfield or brownfield developments were undertaken in difficult market conditions. Oil & Gas UK predicted this fall last year, although, at £11.6 billion, capital investment for 2015 came in just above the forecast range. The main factors that drove the higher than anticipated figure were: • The sanction of greenfield projects (Culzean, the Glenlivet–Edradour development, the Scolty–Crathes development) and significant brownfield investment in the Eastern Trough Area Project (ETAP). Fresh capital sanctioned in greenfield developments last year totalled £4.4 billion with a further £670 million in the ETAP area 8 . However, it is worth noting that only £0.5 billion of this investment was actually spent last year, the remainder will be spent over the next five years as the projects are developed.

• Further slippage and cost overruns of major projects that were expected to start production in 2015.

• A longer than anticipated time-lag between global capital cost deflation and the impact of this on capital projects on the UKCS.

• More capital than anticipated invested in UKCS infrastructure.

The majority of capital invested last year was spent developing new projects that were approved prior to the start of 2015. Investment in existing assets accounted for over one third of the total spent last year, most of which was essential to maintain production.

Figure 11: Capital Investment by Activity Type

£0.4 billion

Capital Invested in Projects Sanctioned prior to 2015 Capital Invested in Projects Sanctioned within 2015

£4.6 billion

£6.1 billion

Capital Invested in Existing Assets

Capital Invested in Pre-Sanction Projects

£0.5 billion

Source: Oil & Gas UK

8 http://bit.ly/BP-ETAP

page 22