Up to 16 new oil and gas developments could go forward this year in UK waters with a combined investment cost of around £5 billion ($7.03 billion), according to Oil & Gas UK’s latest Business Outlook report.
That figure, if realized, would exceed the total number of new UK oil and gas field approvals sanctioned over the last three years.
The new developments – a mix of greenfield and brownfield projects – could deliver more than 450 MMboe, although as the association points out, this would still be insufficient to sustain long-term UK offshore production at current levels.
It also cautions that increased exploration success and maximizing the potential of existing remain essential to the future of the UK sector.
Deirdre Michie, chief executive of Oil & Gas UK, said: “What we have learned in our response to the downturn has made us better equipped to tackle the ongoing challenge of maximizing production for the longer term and boosting profitability in the supply chain but without increasing overall project costs or damaging competitiveness…
“More projects are taking place and investment is happening because of the sweeping changes made to adapt to the challenging business climate. This has helped make the UKCS [UK continental shelf] one of the most attractive mature basins in the world in which to do business and we will continue to work hard to maintain our competitive advantage.”
The report also found that despite sweeping redundancies since the oil price slump, more than 300,000 people still work in the sector across the UK, and over half of the companies surveyed expect to step up recruitment this year.
However, some businesses are struggling to enlist staff with certain skills and competencies, and are looking to changes to trainee and apprentice schemes to address this shortfall.
In addition, the association forecasts more merger and acquisition activity in the sector this year, but below the levels of 2017 when deals exceeded $8 billion.
Revenue for the UK supply chain should stabilize in 2018, with companies benefiting from increased operational spend and the largest amount of new capital activity across the basin since 2014.
UK offshore production should rise over the next two years: then the lack of investment during the downturn will have an impact, with a risk that production heads down again.
Subdued drilling activity remains an area of serious concern. Michie commented: “We need more exploration if we are to get close to recovering the three to up to nine billion barrels of yet-to-find hydrocarbons on the UKCS, matched by a continuing focus on improving recovery from existing fields.”
Graham Hollis, senior partner for Deloitte in Aberdeen, said of the report: “Oil & Gas UK’s new Business Outlook is well timed following some uptick in the confidence of the UK’s oil and gas industry in recent months.
“Reflecting this confidence, some of the outlook’s key findings are encouraging, not least the increase in production forecast for 2018, and level of investment expected in the UKCS. These clearly tie back to the efficiencies and improvements that have been put in place during the last few years.
“However, some fundamental challenges remain, particularly the need for new, successful, exploration and maximizing the potential of existing fields. It is in these areas that all parts of the industry need to embrace transformative change – collaboration, innovation and new technology will all be critical to assuring the long-term future of the UKCS.”
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