Economic Report 2019

In addition to this there have been a number of smaller asset purchases and farm-ins to exploration and pre- development opportunities. It is clear that the UKCS is a basin which can satisfy the strategies of a wide range of investors, and ensuring investment opportunities are in the most appropriate ownership is resulting in increased recovery across the assets. For this reason, OGUK believes that the increased diversity of companies in the basin is positive and should be embraced. The new wave of investors is also being welcomed by companies across the supply chain. New entrants are generally more reliant on the support and services of the supply chain and are often more able to embrace new ways of working adopt alternative approaches and contracting models. New Field Approvals Many of the projects which have received recent approval have benefitted from significant cost reductions, achieved through project re-scoping and adopting new ways of working and supply chain models, as well as technological improvements. This is evidenced by the fact that the projects approved in 2018 have average development costs in the region of $9/boe. Although average development costs vary depending on the scale and nature of individual projects, this represents the lowest level for a decade and a similar level to projects which gained approval in Norway last year. So far in 2019, three new fields have received investment approval: Seagull, operated by Neptune Energy; Storr, operated by Apache North Sea; and the Sillimanite field, which straddles the UK-Netherlands border, is being progressed by Wintershall DEA (pending approval of the field development plan [FDP]). It is expected that Seagull will begin production in late 2020 and be tied back to the existing ETAP infrastructure, while Storr could begin production in late 2019 and will be tied into the Beryl infrastructure via the Skene field. The Sillimanite field is expected to commence production in 2020. Neptune Energy is operator of Cygnus in the southern North Sea, the largest producing gas field in the UK. The company is committed to growing its operations and takes an ‘area plan’ view of Cygnus, as well as looking forward to participating in the 32 nd Offshore Licensing Round. Neptune has moved forward several exploration and development projects as operator at a lower cost and on faster schedules than traditional approaches, including last year’s acquisition of the Seagull development and Isabella prospect. With Seagull — a multi-well subsea project connecting the oil and gas field with the BP-operated ETAP facility — Neptune anticipates an additional 50,000 boepd at peak. It is a strong example of a collaborative effort among operators and the supply chain, supporting the principles of MER UK. Neptune has been active in exploration and participated in the drilling of three wells on the UKCS in 2018–19. The Isabella prospect is considered one of the largest undrilled exploration opportunities in the central North Sea, with spudding anticipated later in 2019. CASE STUDY

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In addition, there have been some examples of significant brownfield investments to upgrade existing fields and infrastructure. Repsol Sinopec has confirmed it will reinstate production from the Galley field which has been shut in since 2012 and INEOS FPS is investing £500 million to upgrade and extend the life of the crucial Forties pipeline system, which transports around 40 per cent of UKCS liquids production.

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