Business Outlook 2018

Significant progress has been made on the UKCS to make this investment potential a reality. The UK has enhanced its selling power by differentiating itself from other basins internationally through:

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• Driving efficiencies throughout the business, resulting in 50 per cent UOC reductions and vast improvements in capital project execution • The development of a fiscal regime that puts the UKCS in the top quartile in terms of post-tax returns • The influence of an economic regulator (the OGA) focused on maximising recovery from the basin • A well-established and world-renowned supply chain • An extensive network of infrastructure in place to service operations • Straight-forward access to markets, allowing producers to sell their product easily Increased investor confidence in the basin is further illustrated by the $8 billion of M&A activity in the UK upstream business last year (see section 3.3). Maintaining these differentiating factors is critical so that the UKCS retains its value for existing investors looking to carry out brownfield activities as well as attracting prospective new investors in an increasingly competitive global market.

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Figure 22: Capital Investment Associated with New Field Approvals

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5

18

16

6

14

12

7

10

8

(£ Billion - 2017 Money)

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8

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Total Capital Investment by New Field Approvals

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9

0

2010 2011 2012 2013 2014 2015 2016 2017 2018

Source: OGA, Wood Mackenzie

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In addition to projects being progressed for approval in 2018, there are up to £25 billion of pre-development opportunities under consideration, with varying probabilities of proceeding to sanction. These contain an estimated three billion boe of recoverable reserves, but many will require further appraisal, review of the scope to improve efficiency and reduce costs, and/or deployment of innovative technologies to ensure they are commercially attractive. Timely progression of these projects is essential to help support the UK supply chain and sustain production into the next decade.

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