Deloitte sees healthy year for UKCS exploration

Aug. 5, 2013
The level of exploratory drilling on the UK continental shelf remains healthy even though the number of new wells fell slightly in the 2013 second quarter compared with the same quarter in 2012, reported Deloitte LLP's Petroleum Services Group.

The level of exploratory drilling on the UK continental shelf remains healthy even though the number of new wells fell slightly in the 2013 second quarter compared with the same quarter in 2012, reported Deloitte LLP's Petroleum Services Group.

The outlook for the last two quarters of 2013 should continue the positive trend, Deloitte signaled in a report issued in late July.

Sixteen exploratory and appraisal wells were drilled in the UK in the second quarter, seven more than in the first quarter and two fewer than the same period last year. Despite the slight fall from 2012's figures, this year's second quarter still produced two more new wells than the quarterly average since yearend 2011—a year which saw the lowest activity since 2003.

Across Northwest Europe as a whole, 35 new exploratory and appraisal wells were drilled, 10 more than in the first quarter but only matching second-quarter 2012.

The latest figures are in line with what would be expected from a mature region such as the UKCS, said Graham Sadler, managing director of Deloitte's PSG.

Sadler said, "These figures indicate the UKCS remains a strong and productive sector, which bodes well for the final two quarters of the year. I fully expect to see further positive figures in quarters three and four as the region recovers from a prolonged and harsh winter, which was followed by an unusually late spring."

One of the notable features of the second-quarter performance report is the significant increase in farm-in style agreements. The report noted that farm-ins accounted for around 70% of the total Northwest Europe deal landscape in this year's second quarter. Thirty deals were completed in the region, down from 35 in the same period last year.

Sadler said, "The number of smaller companies operating in the North Sea, as many major firms move to less mature areas, in part explains the significant increase in the number of farm-in deals. Farm-ins allow smaller companies to benefit from pooling resources and equipment such as drilling rigs, enabling them to access existing North Sea reserves."

Development activity is also holding strong, with six fields being granted development approval and four actually coming onstream in UK and Norwegian waters. Although the number of fields coming onstream in the UK (three) is down from the same period in 2012 (five), innovative technologies mean that previously ‘subcommercial' developments—those which might not have been considered economically viable—are beginning to provide real prospects, further incentivizing the exploration and development of the area.

Although the North Sea has seen only a slight decrease in the number of new exploratory wells being drilled this quarter, the future remains bright across the region.

Graeme Sheils, energy partner at Deloitte in Aberdeen, said, "This quarter's stable drilling figures should not detract from the fact that the UKCS is experiencing high activity levels.

"The market is currently buoyed by a number of factors including a stable oil price, increasing investment and government incentives. With a more positive domestic outlook also beginning to emerge across the rest of the UK, there is a lot of confidence in the outlook for the North Sea sector," Sheils said.