Economic Report 2018

ECONOMIC REPORT 2018

CASE STUDY

In 2018, BP reaffirmed its commitment to the basin by announcing plans to significantly increase its interest in the giant Clair field from 28.6 per cent to 45.1 per cent. This was a massive vote of confidence in the North Sea and signalled the intent to continue to look for opportunities around established hubs in the west of Shetland and the central North Sea. The deal also underpinned its current positive momentum in the North Sea with its newest asset, the Glen Lyon FPSO, recently completing its ramp up to 130,000 barrels per day and first oil from another major west-of-Shetland project, Clair Ridge, just months away. The North Sea is a growth region for BP and plays a vital role in the company’s global strategy to grow advantaged oil in the upstream. With a strong incumbent position, refreshed portfolio, growing production base and a rich hopper of opportunities the company looks forward to maintaining a significant presence here for many years to come. The UKCS Production Landscape The continued diversification of the corporate landscape has led to a changing production picture on the UKCS, demonstrating that the basin can create value, and be seen as an attractive place to invest, by a wide range of companies – from supermajors to small E&P operators. Since 2009 there has been somewhat of a ‘changing of the guard’, with many utilities divesting interests or consolidating into new operators (such as Centrica and Bayerngas, who combined to form Spirit Energy in 2017, and the divestment of assets by Engie). In line with this, the increase in production from private equity-backed companies (discussed previously) can be seen here in Figure 40.

Figure 40: The ‘Changing Face’ of UKCS Production

Majors Large Caps Mid Caps

Private Equity Utilities Other

100%

90%

80%

70%

60%

50%

40%

30%

Proportion of UKCS Production

20%

10%

0%

2000

2009

2018

Source: Oil & Gas UK, WoodMackenzie

Major operators have maintained a strong presence in the UK, accounting for around 50-60 per cent of production since 2000. In some cases, these positions have not only been maintained, but have grown. Total, for example, has enhanced its production portfolio through the acquisition of Maersk Oil in 2017, while BP has made significant additions through developments such as Clair and Quad 204, and Shell has committed to its first major new projects in the basin since 2011.

This illustrates the long-term value that the UKCS holds and its continued strategic importance within corporate portfolios.

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