June 27, 2013
UK Production – The Three Humped Camel
Figure 1: Production profile for United Kingdom, oil and gas production by lifecycle, kboe/d (Source: UCube from Rystad Energy).
Oil and gas production in the United Kingdom peaked in 1999 with 4.5 Mboe/d produced. Since then, production has dramatically decreased, down to an estimated 1.7 Mboe/d for this year. This decrease has mainly been driven by the giant fields Brent, Forties, Brae, ETAP, Beryl and Magnus, which have been in decline since 2000. A second important factor is the discovered resources in the 1990s and 2000s, which were at a historic low, adding insufficient reserves to production. Looking ahead, there is an expected 30% increase, 500 kboe/d, towards the end of this decade. This would make UK production peak for a third time, and it would result in the UK remaining the 20th largest O&G producer in 2020. In 2020 only one third of the production is expected to come from fields that are producing today. The other two thirds, 1500 kboe/d, are expected to come from fields that are sanctioned today (Under development) and fields that are non-sanctioned today (Discoveries). Interestingly, more than half of the increase of 1500 kboe/d, is estimated to come from old discoveries discovered before 1995 and redevelopments of existing fields (16 redevelopment projects in total, adding 1,000 Bboe). New technology and higher oil prices have driven this evolvement. Projects worth to mention are the heavy oil fields Clair Ridge, Mariner and Bressay, and the redevelopment of Schiehallion (Quad 204).
Oil Service Purchases Supporting Growth
Figure 2: Total UK E&P purchases from 2005 to 2020 split by service segments, MUSD nominal (Source: DCube from Rystad Energy).
The increase in production towards 2020 needs to be supported by ~30 BUSD annual E&P purchases, a 50% step up from the last five year average of ~20 BUSD. Towards 2008, the increased investments were mainly driven by service price inflation. Across all service segments globally, we experienced double digit price inflation. After the recession in 2009, the growth was mainly activity driven by investments at Foinaven, Laggan, Jasmine and Golden Eagle. The peak in OFS purchases is anticipated to occur in 2015-2016, with investments at Lochnagar/Rosebank, Mariner, Bressay and Cygnus at full pace. After the old, now feasible, discoveries are developed, it is estimated that the purchases will fall back to 2012 levels in 2020, based on the small amount of discovered resources over the last decade. However, an improved discovery success rate and full impact of the new Brownfield Allowance may unlock a considerable upside.
150 BUSD To Be Spent Towards 2017
Figure 3: Oil field service demand 2013-2017, split by water depth, MUSD (Source: DCube from Rystad Energy).
Subsea equipment and installation services is the largest oil field service segment in the UK. About 32 BUSD, an increase of 137% relative to the past five years, will be spent until 2017. The demand originates both from shelf and deep water activity. The Quad 204 project with 54 planned subsea wells is an important driver, in addition to the more than 100 marginal fields, which will be developed as subsea tie backs. Of the 32 BUSD subsea market, about 15 BUSD will be directed to SURF, 10 BUSD to subsea services such as IMR, and 7 BUSD for subsea equipment. This is good news for Subsea 7 (covering BP and Shell portfolios), Technip (ConocoPhillips, BP and BG) and Bibby Offshore (Centrica) which holds the strongest positions in IMR frame agreements. The UK has one of the highest offshore operational costs with 14 USD/boe, and this drives the operational, professional and maintenance services. Towards 2017, 34 BUSD is believed to be spent on these services, and about half of this will be directed to aging fields with higher demand for maintenance. This will leverage the market for Stork, BIS Salamis and Cape, which have 80% market share of all MMO frame agreements in the UK.
Contact: Audun M. Martinsen, Analyst
Phone: +47 24 00 42 00
Mobile: +47 48 07 76 11
Contact: Julia Weiss, Marketing Manager
Phone: +47 24 00 42 90
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About Rystad Energy
Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.
Rystad Energy is fully owned by the management. It is vital to maintain this independence in operations. We consist of highly qualified and experienced consultants, analysts, technology as well as support people that help enhance and create a complete product and service delivery. Our extensive knowledge on global and local markets is driven by the engagement of our international staff members.
Rystad Energy’s products and services are intended for E&P and oilfield service companies, investors, investment banks and governments. We deliver:
• Global databases – online, complete and integrated field-by-field databases covering the E&P and oilfield service industry
• Consulting services – providing support on strategy, transactions, market assessments, macro trends, etc.
• Research products – multi-client reports and tools on selected regional topics, including NASAnalysis products
Rystad Energy’s headquarters are located in Oslo, Norway, with additional research teams in India. Further presence has been established in the UK (London), USA (New York & Houston), Russia (Moscow), for Africa as well as South East Asia.
About the Author
Audun M. Martinsen
Audun M. Martinsen holds a M.Sc in Marine Engineering from Norwegian University of Science and Technology (NTNU) and University of Berkeley, California. His fields of expertise is the global oil field service market and EP cost analysis. Audun is currently the product manager and lead analyst of oil field services in Rystad Energy.
The oilfield service database DCube is an asset-based, bottom-up database for forecasts on oilfield service revenues. DCube is an unprecedented analysis, forecasting, and decision tool for the global oilfield service market, incorporating all important market drivers.
UCube is an online, complete, and integrated field-by-field database, including reserves, production profiles, financial figures, ownership, and other key parameters for all oil and gas fields, discoveries, and exploration licenses globally. UCube includes 65,000 oil and gas fields and licenses, portfolios of 3,200 companies, and it covers the time span from 1900 to 2100.