Economic Report 2020

be revised. However, the sheer number of prospects recorded speaks to the potential of the basin and focus should be given to maximising this within the constraints of the current climate. Understanding future company plans and the progression timeline of these reserves will be important in retaining a strong supply chain and avoid early decommissioning of infrastructure. It could also lead to a broader loss of domestic supply chain capability to service the energy transition, leading to a greater reliance on external resources. Recent Licensing Rounds have also demonstrated the continued appetite from companies to explore on the UKCS. The 32nd Licence Round saw 113 licences offered to 65 companies across all four key basins, ranging from super-majors extending their presence to new entrants picking up acreage for the first time. OGUK is working closely with members to develop frameworks to progress a range of opportunities in the basin through a variety of approaches. The Improving Partnerships Work Group, part of the Wells Taskforce, is aiming to create a number of multi-operator, multi-well campaigns to deliver value for UKCS operators and the supply chain. The collaboration between operators and supply chain will be critical in progressing opportunities in the maturing basin. Unlocking these opportunities also provides important demand for supply chain companies to service. Many areas of the supply chain are in an increasingly fragile position, especially as the impact of lower activity levels follows so closely from the previous downturn. It is important that these companies endure to meet future demand in the oil and gas industry in an

efficient way and to service demand from projects as part of the drive to net zero. The strength of the supply chain is a key part of the basin’s competitive proposition, as is the expanse of infrastructure in place. Seventy-five per cent of current blocks lie within 50km of existing infrastructure, meaning the basin is primed for operators to capitalise on short-cycle projects such as tie-back wells. Last year 82 per cent of the exploration wells drilled were infrastructure led, and this trend has continued this year with only one exploration well that did not target an area around existing infrastructure. These opportunites provide good capital flexibility and carry lower technical risk than frontier prospects. It would be expected that this trend will continue as companies look to make the most of the infrastructure in place. This will also be important from a net-zero perspective, with exploration activity helping to extend the life of infrastructure and opening up re-use opportunities for CCUS and hydrogen production and integration with other marine energy sources. As with all capital-intensive industries, experience shows that a competitive and supportive fiscal and regulatory framework is the best means of facilitating investment. It is important that they are developed from an energy security perspective, but also to ensure the maintenance and protection of the skills, experience and capabilities within the industry that will be crucial to supporting net-zero solutions. Encouraging continued investment in the UK and anchoring supply chain resources will be critical in driving the UK towards net-zero.

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