OIL and gas drilling on the UK continental shelf (UKCS) dipped by 9% last year, according to figures out today.
The latest north-west Europe review, compiled by Deloitte’s petroleum service group, showed 71 exploration and appraisal wells were started in British waters last year against 77 in 2009.
Graham Hollis, energy partner with Deloitte in Aberdeen, said: “Although the oil price has steadily increased during the second half of 2010, this time last year the economy was still very fragile and it’s likely that economic uncertainty may have played a part in a more cautious approach to drilling schedules for 2010.
“However, the drop from 77 to 71 wells is fairly minimal and last year’s number of wells represents a return to the fairly consistent levels seen throughout much of the last decade. Moreover, these figures are in line with what we would expect to see in a more mature region such as the UK continental shelf.
“The 2010 figures show an increase in exploration drilling compared to 2009 and this might be a trend we see continue in 2011 if the higher oil price continues, as more technically difficult drilling projects become more viable.”
Last year saw a big jump in farm-ins: increasing to 58 from just 16 in 2009.
Farm-ins allow a company to acquire an interest from one of the existing licensees.
Graham Sadler, managing director of Deloitte’s petroleum service group, said: “The increased farm-in activity is particularly significant and has been dominated by the independent oil and gas companies in 2010, as they seek to fund their work programmes and minimise their financial exposure. This makes sense given the difficult credit conditions that have prevailed until more recently.
“At the same time, it is likely that these farm-ins have presented, to those companies looking to increase the equity they hold in potential reserves, a less risky and less costly method of expanding their portfolios. This strategy may continue in 2011 as cautious optimism returns to the corporate sector more generally and companies in the UK oil and gas sector look to further expand their portfolios.”