Record levels of activity forecast for UKCSNews // November 13, 2007
UKCS consultancy Hannon Westwood has released today a special report 'Future UKCS Drilling Activity’ – an analysis of E&A well activity through to 2010.
The report identifies more than 220 wells in the planning stage, expected to target around 9.6 billion boe (un-risked) and requiring an investment of US$4 billion.
The report forecasts an activity level of 55-60 wells per year (plus sidetracks) over the next three to four more years, subject to oil price. Of these wells, new entrant companies (those who were not active in the UKCS before 2003) are forecast to be involved in around 50 per cent of future E&A activity.
Highlights of the report include:
• Wells in planning stage: 224 UKCS wells
• Well spuds expected through to 2010: around 55 – 60 annually
• Reserves being targeted: 9.6 billion boe
• New entrant participation: circa 45 per cent
Regional planned activity foreseen in the report includes: Northern North Sea: 35; Central North Sea: 97 wells; Southern North Sea: 68 wells; West of Shetlands: 16 wells; East Irish Sea: 8 wells
• Investment spend required for drilling: $4 billion
• Planned wells requiring full or partial third party funding: over 80
Jim Hannon, Founding Partner of Hannon Westwood commented: “As of end September 2007, our database on future drilling shows that we are continuing a 10-year trend of E&A activity levels. We believe that the UKCS sector is capable of supporting 50-60 vertical E&A well spuds per year, for at least the next three to four years or more if the increased number of rigs on E&A drilling is maintained. Based on over 1,250 prospects and 411 undeveloped UKCS discoveries in our database, we calculate a remaining risked UKCS oil & gas potential of over 24 billion boe.”
“More than half of the forecast activity is for the Central and Southern North sea (165 wells), with around a third of the wells (67) in these areas requiring partial or full funding. Those blocks under most immediate pressure to secure funds are held under Promote Licences, followed by Fallow acreage.”
Andrew Vinall, Technical Director of Hannon Westwood added: “With activity levels returning to levels previously unseen since 1998, low rig capacity more than any other factor, seems to be the main constraint on the pace in which the UKCS is now drilled despite rig rates appearing to have plateaued. Even with 19 drilling units currently active on the UKCS, we are expecting significant spillover to 2008 of the remaining 2007 planned wells.”
“As a follow-up to our 2005-06 Drilling Activity Report in September 2007 that demonstrated extremely successful finding and appraisal rates for the UKCS over the two-year period, we expect the UKCS to be an extremely active oil and gas basin for the next several years.”
The report also highlights the distribution of planned wells by Licence Round, with planned activity expected to follow the trend of a bi-polar distribution of wells around the 1st and 4th Rounds and 20th-24th Rounds. The report indicates that licences in the 23rd Round are the most under-funded and also hold the highest potential reserves (unrisked), which is probably a consequence of Promote activity and other new entrants diluting equity on a suite of higher risk/higher reward plays than has been seen for some time.
The report is based on continuous scouting and analysis of prospects, discoveries and planned UKCS activity in the Hannon Westwood intelligence database.