The largest number of oil and gas fields are being developed in the UK North Sea in 16 years but are costing more than ever, according to a report on the sector.
The report, by energy consultant Wood Mackenzie, said the pipeline of new projects and developments likely to go ahead offshore UK was looking healthy but that exploration had dropped off this year.
It said 50 fields, containing more than two billion barrels of oil equivalent, were making significant progress towards development sanction – the largest number since 1995.
However, many were small and more than half of the estimated £30billion total capital expenditure was associated with heavy oil, high pressure/high temperature, tight gas fields and developments west of Shetland.
As a result, development costs per barrel of oil equivalent (boe) were at an all-time high of nearly £11 per boe, Wood Mackenzie said.
Moreover, to maintain the level of activity “significant levels of exploration success and continued investment” would be needed in the sector, it said.
Lindsay Wexelstein, UK lead analyst at the firm, said: “Although there are a number of other, currently non-commercial discoveries which may progress to development, significant future exploration and appraisal success will be required to maintain activity at current levels.
“Overall, the development of the probables portfolio is key to slowing the decline of UK domestic production and is expected to account for a third of production by 2019.
“The development of the probable fields west of Shetland are particularly important, as these are expected to account for 15% of UK production by 2022.
“However, this is not without risk given the particularly challenging nature of some of the large projects planned for development.”
Technically-challenging projects accounted for a fifth of the 50 fields.
The majors hold more than 55% of reserves and will play a key role in driving forward challenging, high-cost developments such as Mariner, Bressay and Rosebank, the report said.
The number of small companies operating probable developments had increased by 50% on 2009 levels.
Earlier this week, a new report said the UK North Sea oil and gas industry had the potential to continue for several decades and its supply chain for longer still.
The 2011 economic outlook from industry body Oil and Gas UK showed investment in the North Sea rose by one-fifth to £6billion in 2010, making the oil and gas industry the largest investor among the UK’s industrial sectors.
Recommended for you
