Economic Report 2018

ECONOMIC REPORT 2018

CASE STUDY

Nexen Petroleum U.K. Limited, its co-venture partners, and its supply chain partners, have recently received full sanction to move ahead with the Buzzard Phase II (BPII) project.

BPII is using an integrated project team, comprised of Nexen and supply chain partners AGRWellManagement Limited, Baker Hughes, a GE Company (BHGE), COSL Drilling Europe AS, Subsea 7 Limited and Worley Parsons Services UK Limited. This team is working together based on an incentivised, outcome-based commercial model and is on-site at Nexen’s Aberdeen office. BPII is a subsea development of the Buzzard northern area. The objective of this project is to safely develop additional reserves and bring new production on stream, supporting the goal of maximising economic recovery in the North Sea.

A significant amount of this work is being executed by UK-based companies, providing investment to the local UK supply chain and supporting jobs across a range of UK locations.

First oil is expected Q1 2021.

3.8 Drilling Activity In recent years, drilling activity on the UKCS has been at record-low levels. Forty-one development wells were drilled in the first six months of 2018 in comparison with 47 in the first six months of 2017 and a total of 71 across the full year. This low rate of development drilling is reflective of a combination of reduced infill drilling on existing fields and fewer wells in greenfield developments – the result of the decline in the number of fields being sanctioned and the relatively small size of new fields. The scarcity of capital has also meant that only the most competitive and profitable wells have been drilled.

Depressed drilling activity across the basin will negatively impact UKCS activity in two ways:

• Lower development drilling will result in a lower well stock, and hence lower production levels, following a lag time. This will occur as older wells are decommissioned at a greater rate than new ones are being drilled. • Reduced drilling activity will impact the capabilities and resources available to support future drilling on the UKCS, as rigs are stacked by drilling contractors and equipment redeployed to other basins with greater opportunities and higher activity levels.

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