DW: UK set for drilling activity growth?

Offshore exploration activity on the UK Continental Shelf is slated for growth, Douglas Westwood writes in its DW Monday report titled: “A Boost for UK Offshore Drilling?”

Sir Ian Wood

From a peak of 396 in 1996, numbers of wells drilled offshore UK fell to 164 in 2013, a low not seen since 1979, the DW report reads.

Development wells were down from 289 in 1998 to 120 in 2013. Exploration & appraisal drilling, on which offshore production ultimately depends, saw numbers fall from 224 in 1990 to 44 last year. Of these the key driver is of course exploration wells, down from 157 in 1990 to just 15 last year.

Wood Review to the rescue

However, drilling activity is now expected to increase over the next few years as government and industry reacts to the recommendations in Sir Ian Wood’s report – the “Wood Review” – to maximise UK offshore oil & gas recovery.

Related: Oil & Gas UK Boss: We Are Not Drilling Enough Wells

The most significant of these being the need for a new regulator to help industry to work collaboratively and furthermore, to implement various strategies to address problems with exploration drilling and improved oil recovery, amongst other issues. Also stemming from the Wood Review are proposals for a simplified fiscal regime to incentivise investment and drilling activity and ease the burden upon the new regulator.

So what does this mean for the future drilling market? To meet production forecasts, DW expects that total offshore wells drilled will need to grow from 164 last year to 241 in 2018. Whilst the majority of these would be in shallow water and drilled by jack-ups, deepwater developments in Northern North Sea and west of the Shetland Isles will provide opportunities for semi-submersible drilling rigs.

However, in the longer-term drilling activity will again decline, unless the new regulator can effectively use its new powers to incentivise long-term investment from operators to drill more wells and fully exploit the remaining hydrocarbons offshore UK, Douglas Westwood concludes.

Douglas Westwood provides market research and consulting services to the energy industry worldwide.

 

September 01, 2014

 

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