Economic Report 2019

The UK government recently called for evidence under the banner of S trengthening the UK’s Offshore Oil and Gas Decommissioning Industry . 30 The consultation had two central themes: 1. How the UK decommissioning industry could further improve its ability to serve the UK market, support MER UK and reduce the overall costs of decommissioning 2. What could be done to encourage the domestic industry to export its decommissioning expertise abroad and position Scotland, together with the rest of the UK, as a world-leading hub for decommissioning OGUK believes that a strategic approach should be adopted, building a global decommissioning capability in three phases: 1. Excelling in the UK market: In the immediate term, UK-based companies should seek to maximise their share of the domestic decommissioning market, building on areas where a competitive advantage already exists and creating alliances with others where the UK lacks suitable capability. 2. Competitive regionally: In the short term, the UK supply chain must take full advantage of the regional decommissioning market around the North Sea, much of which can be handled by UK facilities and using UK capability to its full extent. Forecasts suggest that 48 per cent of global decommissioning expenditure will be spent in the North Sea area with the UK, Denmark, the Netherlands and Norway all anticipating an extensive decommissioning portfolio over the ten-year window. 3. Targeted international ambition: In the longer term, the UK should pursue opportunities globally based on its reputation for delivering North Sea projects. However, it should be recognised that some capabilities developed for the regional/North Sea market may not be as relevant internationally. It is essential to identify the areas (both activities and services) where the UK has an advantage when considered against local competitors to develop an international hub for decommissioning. 4.4 Resource Progression Activity Around 45 billion boe have been recovered from the UKCS since production began in the basin in 1967, with an estimated 10–20 billion boe of potential resources still to be recovered. Having the correct investment framework in place is crucial to help unlock this remaining opportunity. The latest data from the OGA 31 show that, at the end of 2018, estimates of the remaining potential of the basin could be categorised by: • 5.5 billion boe of proven and probable (2P) reserves. Reserves considered to be economically and technically recoverable and contained in currently producing fields, or fields under development. Proven reserves have a greater than 90 per cent chance of being recovered, whereas probable reserves have a more than 50 per cent chance of recovery. • 7.5 billion boe of contingent (2C) resources. Contingent resources are known opportunities which are potentially recoverable but do not currently have committed investment plans in place. • 4.1 billion boe of prospective resources (mean estimate). Prospective resources are those in mapped leads and prospects which have not yet been drilled.

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30 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785544/ strengthening-uk-offshore-oil-gas-decommissioning-industry-cfe.pdf 31 www.ogauthority.co.uk/news-publications/news/2019/uk-oil-and-gas-reserves-and-resources-report-published/

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