Business Outlook 2019

Although production trends are forecast to return to a position of decline in the early 2020s there are still areas of significant growth potential within the basin, primarily west of Shetland. Based on current developments and fields expected to come on stream, production from the west of Shetland area could increase from 8 per cent of total UKCS output in 2016, to 36 per cent in 2026. The production increase here in recent years, seen in Figure 8, has been driven by major start-ups such as Quad 204, Clair Ridge and Solan. Through to 2026, it is expected that further new fields will be progressed through to development, including Lancaster, Cambo, Rosebank and Glendronach. This could be further boosted by potential new developments which could arise from exploration opportunities such as Lyon, Warwick and Blackrock, among others (see section 4.2).

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Figure 8: Regional Production Outlook

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100%

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Proportion of Production

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2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 Central North Sea West of Shetland Northern North Sea Southern North Sea & Irish Sea Source: Oil & Gas UK, WoodMackenzie

However, the more mature regions off the east coast of the UK will also continue to provide significant value- adding opportunities for E&P companies. There are currently new developments being progressed within the northern, central and southern areas of the North Sea, as well as additional exploration activities within each area. Companies are increasingly adopting hub strategies, making effective use of existing infrastructure and their extensive geological understanding to maximise recovery from these areas. Competitive fiscal terms, improved costs and commercial alignment allow companies to realise significant value from smaller opportunities. It is important that companies continue to be open to adopting strategic and collaborative approaches, across both E&P companies and the supply chain. This can help improve the economic and technical feasibility of projects which are not currently seen to be viable opportunities. There are a number of examples of constructive models which have helped to unlock and progress new opportunities, such as CNOOC’s Buzzard Phase II and Apache’s Garten field. As well as progressing new field developments, it is crucial that industry retains a focus on maximising recovery from existing fields. Positive progress has been made in this area in recent years, and production efficiency is now at its highest level for a decade (74 per cent), with the improvements in 2017 adding an additional 12 million boe to basin-wide production. 5 Driving increased well intervention activity to maximise flow rates and return shut-in wells to production will also play an important role in maximising recovery from existing fields.

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5 www.ogauthority.co.uk/media/4967/ukcs-production-efficiency-2018.pdf

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