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Exploration and Appraisal Drilling Expenditure
Just over £780 million was spent on E&A activity in 2015, compared with just over £1.1 billion in 2014. Within
this total, expenditure on exploration drilling decreased by over a third from £610 million in 2014 to £390 million
in 2015, while expenditure on appraisal drilling fell by a similar proportion from £440 million to £285 million.
Operators’ expenditure on acquiring and processing seismic data decreased slightly from £95 million in 2014 to
£85 million in 2015. Around half of this was spent on seismic purchase and reprocessing, while the remainder
funded new seismic acquisitions.
A further £20 million came through UK Government funding for two 2D seismic surveys in the Rockall Trough
and Mid North Sea High regions. The government-funded surveys will be made freely available to the industry in
April 2016, providing some 40,000 kilometres of new and legacy data to both industry and academia. This will be
followed by a frontier
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licensing round later in 2016.
In 2015, the average cost per exploration well decreased to £30 million from just under £44 million in the previous
year, the second consecutive annual decline. The fall in 2015 was largely due to the deflation in drilling costs as they
adjust to the price cycle, but also because fewer high-pressure high-temperature (HPHT) or very deep wells were
drilled last year. These are more technically challenging and therefore tend to be more expensive. Individual well
costs last year ranged from under £13 million to over £85 million, reflecting the breadth of complexity involved in
drilling the different types of prospects on the UKCS.
However, over a longer period, exploration costs have risen sharply from an average of just under
£23 million per well from 2006 to 2010 to nearly £42 million from 2011 to 2015. The Oil & Gas UK
50 per cent Challenge Group, working for the the association’s Wells Forum and comprising operators and the
broader supply chain, has been created to help the industry establish a new, lower, sustainable, cost of drilling
that will help to secure the further cost reductions anticipated over the course of this year. This new group is
focussed on reducing drilling costs in the CNS and west of Shetland areas where over two-thirds of remaining
known reserves are located.
Figure 23: Average Cost per Exploration Well Drilled
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20
30
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2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Average Cost per Exploration Well (£ Million - 2015
Source: Oil & Gas UK, OGA
Money)
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The 29th licensing round will be centred on frontier acreage in the Mid North Sea High and Rockall Trough areas but will
also include acreage nominated by industry. A 30th licensing round will follow in 2017 focussed on more mature areas.
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