A Look ahead at UKCS activity

Drilling Intentions

In early 2004, DTI conducted a survey of operators’ intentions to drill offshore exploration and appraisal wells. The survey covered the years up to 2006. Operators were asked to assess each well as certain, probable, or unlikely to be drilled. The survey showed that, after allowing for probabilities, operators expected to drill some 39 E&A wells in 2004 and 37 in 2005 (excluding sidetracks).

Survey results show the expected number of wells is some 30% higher than in the 2003 survey. Total intentions for the three forward years are higher than given by all surveys since 1998 except the 2001 survey. Expected activity in the Southern Basin is some 70% higher than in the previous survey, and West of Shetland expectations are slightly higher. Northern and Central North Sea remain as the areas with the highest expectations. These results are illustrated in the following chart and table.

Intentions to drill E&A wells: from DTI Survey 2004

A further question asked operators for estimates of expenditure on E&A up to 2007. Results showed that operators expect total expenditure on E&A to rise from the 2003 level to some £0.45 billion in 2004 and continue to rise to near £0.49 billion in 2006 before dropping back to £0.32 billion in 2007. Expenditure on wells is expected to rise to form between 68% and 79% of the total cost, and expenditure on seismic work is expected to form between 5% and 7%. This implies that the proportion of overheads or other expenditure is set to decline.

The 2004 survey again asked for the number of intended Exploration wells. The intentions indicate that Exploration drilling will be at 65% or more of total E&A wells, near the 70% seen in 2003, following a run of lower levels at some 50% between 1999 and 2002.

DTI has conducted an annual UKCS Capital Expenditure Survey for many years. It was designed to obtain a view of operators' intentions to invest in oil and gas production on the UK Continental Shelf (UKCS), and proved to be of considerable value to both Government and industry. Since 2000, DTI has co-operated with UKOOA, the operators' representative body, in running a joint UKCS Activity Survey, in order to reduce the burden on companies. A summary has been published by the Economic Activity Group on the PILOT website ( www.pilottaskforce.co.uk/files/workgroup/611.pdf ).

The survey intentions for capital expenditure up to 2006 (which do not include expenditure on exploration, appraisal or decommissioning) are illustrated with results from previous surveys in the following chart and table, under the following categories:- · Sanctioned: fields in production or under development, including sanctioned incremental investment. · Probable fields: potentially commercial and expected to move forward to sanction within 5 years (Probability >50%). · Possible fields: currently non-commercial, requiring new or innovative technology to move forward to sanction (Probability <50%). As in the previous DTI/UKOOA surveys, operators were asked to assign a probability of development to each project. These probabilities have been used to give a weighted profile, illustrating what the industry foresaw as attainable under favourable economic conditions.

DTI has conducted an annual UKCS Capital Expenditure Survey for many years. It was designed to obtain a view of operators’ intentions to invest in oil and gas production on the UK Continental Shelf (UKCS), and proved to be of considerable value to both Government and industry. Since 2000, DTI has co-operated with UKOOA, the operators’ representative body, in running a joint UKCS Activity Survey, in order to reduce the burden on companies. The survey covers production of oil and gas and both operating and decommissioning costs as well as development capital expenditure. This section discusses only the latter. The UK Offshore Operators’ Association (UKOOA) have published their view of the results on their website at http://www.oilandgas.org.uk/ukooa/newpublications/pdfs/ECO4.pdf.

The survey intentions for capital expenditure up to 2008 (which do not include expenditure on exploration, appraisal or decommissioning) are illustrated with results from previous surveys in the following chart and table, under the following categories:-

Intentions and recent investment

Intended expenditure declines sharply after the initial years of the survey, since intentions do not include allowances for new discoveries, and are given only where sufficient knowledge exists for reasonable estimates to be made.

Totals prior to the joint surveys were generally optimistic for the first survey years compared with actual expenditure and understated for the later years as developments slipped and new projects came into play. If data from these prior surveys are equivalent to the ‘Sanctioned & Probable’ categories alone then, based on these earlier differences, one might expect expenditure to be similar to the weighted profile at £3.24 billion in 2003, rising to £3.43 billion in 2004. The remaining plans and possible expenditure would then slip, giving chances of higher actual expenditure in the following years.

This data was last updated on : July 2004 and is due to be updated on : June 2005

If any errors are found or if you have any comments or other queries please contact:

Philip Beckett
email: philip.beckett@dti.gsi.gov.uk
phone: +44 (0) 20 7215 5260
fax: +44 (0) 20 7215 5228

Back | Title | Table of Contents
Appendix 1 | Appendix 2 | Appendix 3 | Appendix 4 | Appendix 5 | Appendix 6 | Appendix 7 | Appendix 8 | Appendix 9
Appendix 10 | Appendix 11 | Appendix 12 | Appendix 13 | Appendix 14 | Appendix 15 | Appendix 16 | Appendix 17
Index Map | Plate 1 | Plate 2W | Plate 2E | Plate 3W | Plate 3E | Plate 4W | Plate 4E | Plate 5 | Plate 6
Plate 7 | Plate 8W | Plate 8E | Plate 9W | Plate 9E | Plate 10W | Plate 10E | Plate 11 | Plate 12 | Legend