Economic Report 2018

Working closely with industry, the OGA has made significant improvements to the licensing process. The Licensing Round system has been updated, with frontier and mature acreage now awarded in alternate Rounds (prior to this, Licence Rounds covered all unlicensed acreage). In 2017, the 29 th Round focused on frontier areas, while the 30 th Round focused on mature areas. There is optimism that the 30 th and recently launched 31 st Frontier Licensing Rounds could be a catalyst for an increase in exploration activity. The 30 th Round saw a threefold increase in the number of applications and twice as many blocks awarded compared with the 29 th Round. This increase is in part due to the acreage offered being more mature in nature, and in general closer to existing infrastructure. This is in keeping with the general trend towards more risk-averse, infrastructure-led exploration which is associated with faster development cycles and return on investment. The range and diversity of the companies awarded licences also suggests confidence in the potential of the UKCS, with seven companies being awarded acreage for the first time in the 30 th Round and three in the 29 th Round.

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2

3

Figure 33: Number of Commitment Wells and Discovered Resources by Licence Round 29

4

250

40

Wells (Firm and Contingent) (LHS) Volumes Discovered per Round (RHS)

35

5

200

30

25

150

6

20

100

15

7

10

50

5

Number of Commitment Wells per Round

8

0

0

Discovered Volumes on Acreage Awarded (Million boe)

25 (2008)

26 (2010)

27 (2012)

28 (2014)

29 & 30 (2016 & 2017)

Licence Round (and Year)

Source: OGA, Oil & Gas UK

9

Despite the increase in both the number of applications and commitment wells in the 30 th Round, the 29 th and 30 th Rounds still lag those prior to the downturn, even when their respective commitments are combined. There were 21 commitment wells within the 29 th and 30 th Rounds, although only 11 are firm. Although there were a greater number of wells committed in earlier rounds, these have not necessarily translated into higher discovered volumes. Despite there being around 80 per cent fewer commitment wells in the 28 th Round compared with the 25 th , volumes discovered to date have been on par. This is perhaps reflective of companies only drilling the most promising prospective targets as the falling oil price put pressure on exploration budgets.

10

11

29 The 29 th and 30 th Licensing Rounds can be considered together due to their specific focus on frontier and mature acreage, respectively.

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