Business Outlook 2020 - Markets & Investments

supply and demand imbalance

supply and demand imbalance

significantly and 2020 could see the first annual decline since 2009

and hit a low of 20 p/th in early 2020

significantly and 2020 could see the first annual decline since 2009

and hit a low of 20 p/th in early 2020

BUSINESS OUTLOOK 2020

in 2019 – the lowest average for over a decade

Development 50%

450 in 2019 – the lowest average for over a decade

50%

Drilling Activity Along with investments in new capital projects, OGUK now anticipates a reduction in drilling activity this year. At a $60–65 price range OGUK had expected the number of wells drilled to be in a similar range to 2019. However, based on recent experience, it is conceivable this could be down more than one-third, reflecting the reductions seen in 2015–16 and signalling a return to record-low levels. Coupled with this, OGUK would also expect the rate of well decommissioning to slow. Companies may place increased attention on lower- cost activities which maximise the potential of existing well stock, such as well interventions to safeguard, restore or increase production rates. It is likely that drilling activities which are not firm commitments with contracts in place will be delayed or cancelled, and it is possible that some contracted activity may also come under pressure. As well as reducing the rate at which reserves are progressed through to production, this will have a significant impact on supply chain companies, with many drilling contractors still feeling the effect of a period of lower activity and day rates in recent years. Rystad Energy estimates that global demand for mobile drilling rigs could fall by a further 15 per cent this year. The UKCS may be in a cash-loss posi�on this year for only the E&P revenues could fall by almost 50% compared with two years ago, due to lower commodity prices Domes�c produc�on was enough to meet 51% of gas demand and 74% of oil products in 2019 51% gas 74% oil The indust y is im ortant for energy security The UKCS may be in a cash-loss po i� n this yea for only the E&P revenues could fall by almost 50% c mpared with two years ago, due to lower commodity prices 51% gas 74% oil

Exploration

Appraisal

Decommissioned

400

350

300

250

Domes�c produc�on was en ugh to meet 51% of gas demand

200 E&Ps will take st ps to preserve cash flow

Delivering Roadm p 2035 will help reduce UK’s reliance on nergy imports

150 E&Ps will take steps to preserve cash flow Total Wells Drilled and Decommissioned

Delivering Roadmap 2035 will help reduce UK’s reliance on energy imports

100

and 74% of oil products in 2019

– with reduc�ons in ac�vity and investment expected

50 – with reduc�ons in ac�vity and investment expected

0

1964 1969 1974 1979 1984 1989 1994 1999 2004 2009 2014 2019

Source: OGA, OGUK

141 wells were drilled in 2019

141 wells were drilled in 2019

The ind stry is important for energy security and can also help advance the pa to net zero – government and regulatory support is vital

Drilling could now be down more than one-third as companies look to defer ac�vity

Drilling could now be down more than one-third as companies look to defer ac�vity

and can also help advance the path to net zero – government and regulatory support is vital

third �me in 40 years

third �me in 40 years

– 38% more than 2018

– 38% more than 2018

14