Market Insight December 2017

MARKET INSIGHT DECEMBER 2017

3. Operational Trends Forecast production increase in doubt due to Forties Pipeline System Outage

The recent upward trend in production was set to continue in 2017 before the outage at the Forties Pipeline System (FPS) in the fourth quarter. Although the total impact of the unplanned shutdown is not yet clear, with the news having only broken at the time of going to print, FPS is responsible for transporting over 40 per cent of the UKCS’ liquids production with over 80 fields feeding into the pipeline. Production this year has been supported by no less than nine greenfield start-ups over the first three quarters of the year, already one more than the eight seen during the whole of 2016. Volumes were also boosted by the significant restarts of the Schiehallion and Loyal fields, which are expected to reach plateau production of 130,000 barrels per day before the end of the year through the Glen Lyon floating, production, storage and offloading vessel. Most of this year’s start-ups were discovered more than a decade ago, with the average time from discovery to first production as long as 16 years. Advancements in technology and attractive economic conditions at the time of sanction are the primary drivers behind the investment in these fields that were once seen as uncommercial.

Figure 5: Production

180

160

140

120

100

Net Gas

80

60

40

Quarterly Production (Million boe)

Liquids

20

0

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Source: Department for Business, Energy & Industrial Strategy

However, it must be noted that several of this year’s new starts have encountered some technical challenges and are still to reach plateau. The impressive performance of ‘base’ assets on the UKCS have sustained output, with production efficiency expected to increase for the fifth consecutive year in 2017 as continued work in this area reaps rewards.

Although the 2016 start-ups of the high gas content Cygnus and Laggan-Tormore fields contributed towards gas production reaching a five-year high in the first quarter of 2017, output has fallen sharply since then. This is, in part,

8