January 8, 2015
Authors: Espen Erlingsen, VP Analysis, and Julia Weiss, VP Marketing
Publisher: PESGB Newsletter, February Edition
UK E&P Industry
The UK E&P industry has been through an impressive turn-around over the last year. Production is expected to start growing again, while historical investments have more than doubled. This article assesses the UK E&P industry status and outlook, illustrated by the three main drivers, production, exploration success and spending.
Figure 1 shows the total production for the UK split by oil and gas from 2010-2020 (Source: Rystad Energy UCubeFree). Since 2010 when production was at 2.3 Mbbl/d, levels have dropped visibly to a low of 1.5 Mbbl/d in 2013. Production is estimated to recover, with an expected level of 1.9 Mbbl/d by 2020. Oil production in the UK counts for approximately 50% of total production, with a current level of 800 kbbl/d (2014) and an increase to 1.1 Mbbl/d by 2020. In contrast, gas levels have steadily declined, though minimally, from an initial level of around 900 kbbl/d in 2010 to 670 kbbl/d in 2020.
Figure 2 shows the discovered volumes for the UK from 2005-2014 (Source: Rystad Energy UCube). The highest resource level was in the year 2006, where discovered volumes were at 600 million boe due to high volumes in the Jasmine and Jura discovery. From 2007, resources are marked by discoveries of the Jackdaw project, Culzean in 2008, Lancaster in 2009 and Lancaster Whirlwind and Tolmount in 2011. There has been a visibly strong drop in discovered volumes from 2011, with an average yearly discovered volume of 90 million boe/d.
Figure 3 shows the total spending in the UK from 2010-2020 (Source: Rystad Energy DCube). Whilst spending levels were at 27.9 BUSD in 2010, it peaked last year at level of 44.2 BUSD (2014) and is now expected to stagnate at around this level towards 2020. It is expected that a slight drop in operating costs (Opex) will be visible in 2017 due to the closing down of producing fields such as the Ninian field. In terms of spending type, exploration capex has steadily reflected an approximate level of 2 BUSD, and is expected to continue to do so. Capital expenditure has reached a high in 2013 of around 22 BUSD with a decline to 17 BUSD by 2019, whilst operational costs have risen from approximately 17 BUSD in 2010 to an expected 22 BUSD in 2016.
From 2010 to 2013 UK total production of oil and gas has declined by more than 700 kboe/d, from 2.2 million to 1.5 million boe/d. In 2014 this trend was reversed, and for the first time since 1999 production has increased year on year. This turn-around has been driven by the start-up of new fields. This is also reflected by a considerable increase in investments from 2010 to 2013. As the exploration chart illustrates, UK has not been able to add substantial new volumes over the last three years. This implies that there are not that many new projects in the pipeline for development. This is the primary reason why investments are expecting to fall going forward, in addition to low oil prices.
Contact: Espen Erlingsen, VP Analysis
Phone: +47 24 00 42 00
Mobile: +47 41 44 77 61
Contact: Julia Weiss, VP Marketing
Phone: +47 24 00 42 90
Mobile: +47 48 29 87 61
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’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), Africa as well as South East Asia.