Oil & Gas UK Activity Survey 2016

ACTIVITY SURVEY 2016

Constraints on Exploration and Appraisal Activity The lack of available funding and the difficult market environment are cited as the main drivers for the decline in E&A activity. In 2015, 12 wells were affected by difficulties in obtaining capital. The reassignment of budget outside the UK, the difficulty in finding farm-in partners and the current fiscal environment are all factors contributing to the challenges in accessing capital. Smaller organisations and energy utility companies, which have typically accounted for around half of the exploration wells drilled over the last five years, are particularly constrained by capital markets and are therefore not expected to carry out the same level of activity this year. Some of these companies have also been involved in mergers and acquisitions recently and so have been unable to commit to drilling new wells. Access to capital will continue to pose a significant challenge for the UKCS. Information collected by Oil & Gas UK shows that at least 34 potential wells have been affected, in part, by availability of funding and have not been included in companies’ drilling programmes for the next two years. With exploration budgets under continuous pressure, this figure could rise yet further. Exploration and Appraisal Activity by Region As in previous years, the most active area for E&A drilling in 2015 was the CNS region, where half of the wells (13) were drilled and where the most undiscovered resource potential remains (see section 5.1). It is expected that the CNS region will continue to be the most active for E&A activity in the coming years.

Activity in the west of Shetlands (W of S) meanwhile decreased with only two E&A wells drilled, compared with four in 2014, although these wells were successful as Chrysaor announced its Mustard discovery 11 in September.

Reversing the decline in recent years, activity in the NNS region increased to nine wells in 2015 (from three in 2014). Importantly, Apache announced in October news of two discoveries in the NNS – K Prospect and Corona – from exploration wells drilled in the Beryl Area 12 .

The decline in drilling in the southern North Sea (SNS), the most mature region of the UKCS, was anticipated. Two wells were drilled in this area in 2015, down from six the previous year.

11 http://bit.ly/ChrysaorMustard 12 http://bit.ly/ApacheBeryl

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