Exploration activity in the UK continental shelf (UKCS) has tailed off significantly over the past 12 months, according to a new report.
The number of wells spudded during the first three months of 2009 was down by 78% from a year ago, professional services firm Deloitte said yesterday.
The firm’s North West Europe Review, which summarises drilling and licensing in the region and is produced by its petroleum services group (PSG), said the same number of appraisal wells had been drilled in the UK during the first quarter of 2009 as a year earlier.
Some 18 exploration and appraisal wells were drilled during the first three months, a 41% decrease year-on-year.
Derek Henderson, senior partner at Deloitte in Aberdeen, said: “The decrease in activity in the UKCS can be wholly attributed to the sharp drop in exploration drilling as oil and gas companies reassess their priorities in light of the difficult economic conditions.
“Cash continues to be a priority as credit conditions remain extremely tough for organisations in the UK, despite the recent base rate cuts.
“The UKCS is also being adversely affected by the oil price. It is 55% lower than the oil price last March.
“Investment, a supportive tax regime and stimulation of development capital are vital to trigger a rise in exploration and drilling and ensure the long-term security of UK energy supply.”
Industry body Oil and Gas UK’s 2008 activity survey, published in February, said 109 wells had been drilled in 2008, roughly the same as in 2007, but it feared only about 77 might be drilled in 2009.
The group also told the all-party Commons energy and climate-change committee in Aberdeen last month that it had been predicted that investment by the industry could fall by some £2.5billion in the next two years, putting up to 50,000 jobs in the UK oil and gas industry at risk, if the UK Government did not act swiftly to provide tax relief.
Deloitte’s review also summarises deals and corporate or asset acquisitions carried out so far this year.
Robyn Fowler of Deloitte’s PSG said: “The current economic conditions have prompted an increase in the level of corporate deal activity, as those companies in a strong cash position look to acquire vulnerable assets, helping ensure a stronger position in time for the economic recovery.
“In the first three months of 2009, five corporate deals which involve companies with assets in north-west Europe and other parts of the world were announced.
“This compares with one announcement in the first quarter of 2008.
“Four deals involving UK-focused companies of UK subsidiaries were announced in the first quarter, while asset acquisitions have remained stable with six new deals announced in the first quarter compared to seven in the first quarter of 2008.
“Centrica has been particularly active, acquiring interests in three gas fields during the first three months of 2009.”
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