Oil & Gas UK Activity Survey 2016

ACTIVITY SURVEY

2016

page 32

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

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

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.