Business Outlook 2019

Figure 9 shows that, in line with the reduction in actual drilling activity, there has been an increase in well decommissioning activity, with more wells decommissioned than drilled in both 2017 and 2018. Well decommissioning is part of the lifecycle of an oil and gas field, with increased activity in recent years partly driven by reduced rig rates and a lack of activity in other areas. However, decommissioning activity needs to be considered alongside other opportunities and pressures on budgets, as companies adopt a life-of-field approach and therefore it is important that the competing demands on E&P companies for capital allocation are understood. When combined, total activity across development, appraisal, exploration and well decommissioning is at the highest rate for more than a decade, increasing competition within companies for capital, equipment and resources. Although this provides some benefits for the supply chain in terms of activity levels, it is vital that industry retains its focus on barrel-adding and resource progression opportunities. Exploration Activity Despite low levels of activity in recent years, there is increasing optimism around exploration on the UKCS and companies continue to be encouraged by the value that can be realised from the basin. Eight exploration wells were drilled in 2018, the first year that there have been less than ten exploration wells drilled on the UKCS since commercial volumes were first discovered in the basin in 1965. Yet despite the low level of activity, the recent track record of successful finds continued in the form of significant discoveries made in four of the six wells for which results have been announced so far (Garten, Glendronach, Agar-Plantain and Glengorm). In total, these four wells have discovered up to 485 million boe (equivalent to 78 per cent of produced volumes in 2018), with the Glendronach and Glengorm wells providing the largest conventional finds on the UKCS for a decade. The results of the Rowallan well in the central North Sea, operated by ENI, and the Neptune Energy- operated FB9 well in the southern North Sea have yet to be announced.

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It should also be noted that this 485 million boe is a similar number to the total discovered volumes in Norway last year, but was achieved with 20 fewer wells.

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The Oil and Gas Authority (OGA) estimates that, as of the end of 2017, the range of total yet-to-find resources was 2.2–9.4 billion boe, with a likely estimate of 4.1 billion boe. Around 73 per cent of this is estimated to be in the central North Sea (46 per cent) and west of Shetland (27 per cent), with gas expected to account for 61 per cent of prospective resources. This demonstrates a shift within UKCS resources, with oil accounting for around 70 per cent of currently known resources. 7

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7 www.ogauthority.co.uk/media/5126/oga_reserves__resources_report_2018.pdf

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