47 / 88
ECONOMIC REPORT 2015
47
Development Drilling
Figure 33 shows the number of development wells
drilled over the last decade and provides a comparison
against production over the same period. As expected,
there is a strong positive correlation between the two,
with the obvious conclusion that the drive to increase
production will rely on a sustained rise in development
drilling. Likewise, any further decline in development
drilling will further depress the production outlook.
Exploration and Appraisal Drilling
One of the biggest challenges facing the sector is the
progressive decline in E&A drilling over the last decade
(see Figure 34 overleaf). Exploration drilling is now at
its lowest since exploration on the UKCS began in 1964.
Last year, just 13 exploration wells plus one sidetrack
16
were drilled and 14 appraisal wells plus four sidetracks.
For an extractive industry, an active and successful
exploration programme is a prerequisite. The fall-off
in exploration means the UK is only replacing a fraction
of the reserves it produces, diminishing the scale of the
sector and its ability to sustain investment in the near
term and deliver new production over the longer term.
Figure 34 overleaf shows that the rate of exploration
drilling declined sharply in 2009, in part, at least, as a
result of the financial crisis of 2008-09 and the oil price
fall. Exploration activity then staged a brief recovery
before falling back further as the tax rate increased
in 2011. It has since averaged at 16 wells (including
sidetracks) per year. Appraisal drilling has held up better,
though a sharp decline was seen last year following
reduced exploration activity. It is expected to remain
low in 2015.
Over the last two to three years, the rate of drilling
appears to have hit a floor and the number of wells
drilled on the UKCS thus far in 2015 has held up against
the three-year average, despite the precipitous fall in
oil prices witnessed over the last 12 months. It should
be noted, however, that companies were already
committed to drilling most of this year’s wells before the
Figure 33: Development Drilling Activity against the Production Profile
0
200
400
600
800
1,000
1,200
1,400
0
50
100
150
200
250
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Total Production (Million boe)
Number of Wells Drilled
Development Wells Drilled
Production
Source: DECC
16
All sidetracks referred to are geological sidetracks, which is when the target location changes but surface location stays the same.
1
2
3
4
5
6
7
8
9
10