W I R E L I N E
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Risk versus reward
With exploration activity on the UKContinental Shelf at an all-time low, increased investment
in this area is crucial for the sector’s future prosperity. Yet accessing capital for exploration has
its challenges and requires collaborative solutions to manage the risks and reap the rewards.
Wireline
reports
“T
he opportunities on the
UK Continental Shelf (UKCS)
are there,” asserts Alison
Baker, partner at PwC. “Exploration and
production (E&P) companies, big and
small, are exploring new and mature assets
but a risk-averse culture still prevails in the
UK post the banking crisis in 2009 and
this culture feeds through to investors and
within E&P companies themselves.”
Over the last two years, less than
100 million barrels of oil equivalent (boe)
were discovered, with only 15 exploration
wells drilled in 2013 compared to 44 in
2008. In contrast, capital investment to
develop new and brownfield projects was
at a record high in 2013 at £14.4 billion.
For smaller E&P companies, which may
not have the cash flow from operations
or have their activity (and therefore risk)
concentrated in one region, difficulty
in accessing finance for exploration
has been identified as one of the key
constraints contributing to the low levels
of exploration activity. Yet, smaller and
innovative explorers play a crucial role in
the industry in finding new discoveries,
often joining forces with larger companies
to develop them.
NEWS ROUND-UP
ACCES T CAPITAL
EXPLORATION
Collaborative solutions can help manage the risks and reap
the rewards of exploration activity.
Image
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iStock.com/JJPan
