UK North Sea activity has continued to increase with drilling, deal activity and new developments all up on last year, according to a new report out today.
It says that, during the first half of this year, more corporate deals were been struck than in the whole of last year.
Exploration and appraisal drilling in the second quarter, which included BP’s deepwater North Uist well west of Shetland, was up 64% at 18 wells compared to both the first quarter and the same period last year.
However, this year’s figures compare to 2011 – which saw the lowest exploration and drilling activity since the late 1960s.
Accountancy firm Deloitte, which published the report, said while the figures were still not at the levels seen before last year, recent tax measures announced by the UK Government should see the trend continue.
Graham Sadler, managing director of Deloitte’s petroleum services group, said: “We have some way to go before we are back to the levels seen in 2009 and 2010, however the positive announcements in the Government’s March Budget with regards to the extension and change in field tax allowances should encourage further exploration, appraisal and development activity.”
He said further announcements on certainty on the decommissioning tax relief should also help activity, by freeing up cash. A strong response to the 27th Licensing Round would also likely trigger yet more exploration and appraisal in the next two to three years, he added.
Brian Nottage, consultant at analyst Hannon Westwood, said: “We are not surprised at the increases and we are pleased we are seeing some recovery. Last year saw the lowest exploration and appraisal drilling since the late 1960s, early 1970s. What we are seeing now is a recovery back towards more expected levels.
“That is a result of a number of things, just one of which is the tax changes.”
However, he said smaller players among the 130-plus firms operating in the basin were still struggling to get finance.
Mr Sadler added: “With the sustained high oil-price and the evolution of new technologies, companies are now able to develop what, in the past would have been considered as sub-commercial developments and already in the first six months of 2012 we have seen 12 fields (across UK and Norway) being approved.”
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