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ECONOMIC REPORT 2015
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There is no single lever to pull to promote exploration
on the UKCS. The factors restraining activity include:
•
Access to data and licences
– as the basin matures,
licensing needs to reflect current operations and
promote access to fresh plays, which may appeal to
exploration-focused companies. This can be furthered
by the swifter release of seismic and well data.
•
Prospectivity
– the limited commitment to new
3D seismic and wells in the 28th Licensing Round
signalled a lack of confidence in the prospectivity of
the UKCS, which on-going work is seeking to address.
•
Access to infrastructure
– some operators are
concerned that the longevity and cost of existing
infrastructure may restrain exploration programmes.
There also needs to be a coherent programme to
allow multiple parties access to infrastructure on a
commercially efficient basis.
•
Drilling costs
– the cost of drilling an average
exploration well has doubled over the last five years,
to around £45 million per well.
•
Recent performance
– the average discovery size
over the last five years was just over 14.5 million boe,
recognising not all volumes are commercially viable.
The last discovery with recoverable reserves greater
than 100 million boe was Culzean, seven years ago.
•
Access to capital
– in a periodwhere funding is severely
restrained, only the most competitive opportunities
globally will secure exploration capital. A compelling
value proposition needs to be presented to potential
investors reflecting an appropriate balance between
risk and post-tax reward.
All of these factors need to be addressed and
recalibrated if the UK is to reinvigorate exploration.
Over the last two years, Oil & Gas UK has led a number of
initiatives to stimulate the exploration market. Working
with industry and DECC, these include:
•
A review of potential new plays
– drilling over the last
ten years has predominantly been confined to known
basins. Work is being done to identify new plays and
encourage explorers to pursue fresh opportunities.
This is further supported by the government-funded
seismic surveys now being carried out in the Rockall
Basin and the Mid-North Sea High.
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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Discovered Reserves (Million boe)
Technical
Commercial
Source: Wood Mackenzie (Q2 2015)
Figure 35: Reserves Discovered through Exploration
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