Business Outlook 2019

BUSINESS OUTLOOK 2019

Adding a Generation of Productive Life to the Basin Ensuring that the UKCS is an attractive investment destination will be key to achieving the aims of Vision 2035. The UK oil and gas industry is aiming to add a new generation of productive life to the basin — a goal which would see total output of at least one million boepd in 2035 and a cumulative 8.4 billion boe produced between 2019–35. OGUK estimates that to achieve this, around £200 billion will need to be spent by E&P companies over the period, providing a significant opportunity for supply chain companies. This is compared with a scenario without any further capital investment decisions, in which just over £100 billion in total would be expected to be spent during the period. In addition to operational expenditure and committed investment, around £45–£70 billion will need to be attracted to the basin to unlock known opportunities and to ensure that new resources are discovered and subsequently progressed. The deployment of new technology will have an important role to play in unlocking new investment opportunities, by helping to improve efficiencies and the economics of marginal projects. Alongside this, it is crucial that the UK has a competitive, sustainable and well-resourced supply chain which can efficiently service demand.

Figure 22: Expenditure Required to ‘Add a Generation of Productive Life’

£175–£215 bn Opportunity

£20–£25 bn Decommissioning

£55–£80 bn CAPEX

£100–£110 bn OPEX

This £200 billion expenditure can be broken down as follows:

• Securing committed capital investment — Around £9 billion of expenditure is currently confirmed within company business plans to maximise recovery from existing fields and the development of committed new projects. This will deliver around 3.5 billion boe. • Unlocking new investment opportunities — Almost 5 billion boe will need to be unlocked in order to achieve the aims of the vision, requiring £45–£70 billion of investment. Of this, around 2.5 billion boe in contingent resources are known to be under consideration by E&P companies, with varying probabilities of proceeding. Between £20–£30 billion would be required to unlock these projects, although further work is required to improve the economic and technical viability of many of these opportunities. A further 2.4 billion boe will need to be discovered and matured to production, requiring around £5–£10 billion in exploration and appraisal expenditure, rising to £25–£40 billion to progress prospects after discovery. • Operational expenditure to support production and operations — Around £100–£110 billion will need to be spent over the next 16 years to support production from the basin. • Effectively managing decommissioning expenditure — It is estimated that around £1.5 billion will be spent each year over the next decade on decommissioning activity. Based on this, and accounting for potential new efficiencies, between £20–£25 billion will be spent between 2019–35.

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