Economic Report 2013

Oil & Gas UK estimates that total expenditure of £600-1,000 billion (in 2012 money) will be required over the life of the UKCS, if recovery is to reach the higher figures in the forecasts. However, investment is not the only factor that will influence the longevity of the UKCS. Whilst sanctioned investments already guarantee the industry will be active for another 15 to 20 years, the future to 2050 and beyond is reliant on a number of determinants, such as commodity prices, cost inflation, rate of technical improvement, access to infrastructure, fiscal policy, and supply chain capacity and capability. As long as the UKCS continues to be a competitive oil and gas province in which to invest, Oil & Gas UK believes that up to some 24 billion boe of resources remain to be recovered (towards the higher end of these various projections) and the industry will be active beyond 2050. In 2012, 1.54 million boe per day (boepd) were produced from the UKCS, 14.5 per cent less than in 2011. This compares unfavourably with an average annual reduction of about nine per cent a year over the previous decade (shown in figure 8). Furthermore, the 14 per cent reduction in 2012 followed one of 19 per cent in 2011, resulting in a 30 per cent reduction over the course of the last two years and the lowest production since 1977. Figure 9 illustrates how numerous fields have contributed to this decline. The 19 per cent decline during 2011 was the largest recorded for the UKCS since production peaked at the turn of the century, with 230 fields accounting for a 542,000 boepd reduction. Many of these are natural declines on account of ageing, but ten large fields made up 37 per cent of the reduction: of the ten, Buzzard, North Morecambe and Production

Figure 8: The UKCS – A Decade of Declining Production

4.5

4.0

-8.7%

3.5

-9.6%

-10.1%

3.0

-5.1%

-4.6%

2.5

-6.5%

-9.4%

2.0

-19.2%

1.5

-14.5%

1.0

0.5 Oil and Gas Production (Million boepd)

0.0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source:DECC/Oil&GasUK Source: DECC, Oil & Gas UK

Figure 9: Production Losses since 2010 (with the ten largest contributors highlighted by more densely shaded bars in each column)

2.3

2.1

Actual Production

239 fields produced less in 2012 than they did in 2011

1.9

82 fields produced more in 2012 than they did in 2011

1.7 Million boepd

230 fields produced less in 2011 than they did in 2010

93 fields produced more in 2011 than they did in 2010

1.5

0

2011

2012

2010

Source:DECC, Oil&GasUK Source: DECC, Oil & Gas UK

19

ECONOMIC REPORT 2013