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ACTIVITY SURVEY 2016O
IL & GAS UK
ACTIVITY SURVEY 2016
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C ont ent s
1 . F or ew or d 52. S u m m a r y of F ind ing s 73. O il a nd G a s M a r k et s 1 14 . 20 1 5 P er f or m a nc e 1 75. B u s ines s O u t look 25
5.1 R eserv es 25ti
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6. A p p end ic es 55
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ACTIVITY SURVEY 2016
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1 . F or ew or d
2016 Activity Survey
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2. S u m m a r y of F ind ing s 1
• Production on the UK Continental Shelf (UKCS) rose by 9.7 per cent in 2015 to 1.64 million barrels of oil equivalent per day (boepd). ti 2
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• Despite the improvement in production, revenues fell by 30 per cent between 2014 and 2015 to £18.1 billion.
ti The sustained downward trend combined with the latest outlook reinforces that the oil price is likely to be ‘lower for longer’.
• Industry has made substantial progress in reducing costs and improving efficiency. ti
• Despite significant cost reductions, nearly half of the UKCS oil fields (43 per cent) are likely to be operating a t a los s in 20 1 6 a t p r ev a iling p r ic es . ti
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• Oil and gas companies are cutting almost all their discretionary expenditure to survive in a $30 world.titi ti ti
• There are increasing signs that the UKCS is becoming ‘super mature’.
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• To transform the basin, the UKCS needs to become the most attractive, mature, oil and gas province in the world with which to do business.
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R eserv es
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3. O il a nd G a s M a r k et s
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Figure 1: Crude Oil and Natural Gas Prices Re-converged in 2015
0
20
40
60
8 0
100
120
140
2008 2009 2010 2011 2012 2013 2014 2015 2016
Nom
inal
Pric
e ($
/boe
)
Dated Brent
N BP Month Ah ead
Source: Argus Media, I C I S Heren
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Figure 2: US Dollar to UK Sterling Spot Exchange Rate
1.30
1.40
1.50
1.60
1.70
1.8 0
2010 2011 2012 2013 2014 2015 2016
US
Dolla
r to
UK
Ster
ling
Exch
ange
Rat
e
Source: Bank of England
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Figure 3: Brent Futures Curves Reflect Shift in Price Expectations
0
20
40
60
8 0
100
120
2014 2015 2016 2017 2018 2019 2020
Bren
t Fut
ures
($/b
bl)
End 2013 End 2014 End 2015 Feb 2016
Source: I ntercontinental Exch ange
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Figure 4: NBP Day Ahead and Front Winter Prices
10
20
30
40
50
60
70
8 0
9 0
100
2010 2011 2012 2013 2014 2015 2016
Gas P
rice
(p/t
h)
Day Ah ead
Front W inter
Source: I C I S Heren
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Figure 5: Regional Hub Gas and Spot LNG Prices
0
2
4
6
8
10
12
14
16
18
20
22
2008 2009 2010 2011 2012 2013 2014 2015 2016
Gas P
rice
($/M
illio
n BT
U)
N BP Month Ah ead
Henry Hub Front Month
Far East Spot L N G DES
Source: I C I S Heren, N Y MEX
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Figure 6: EU ETS Carbon Prices
0
5
10
15
20
25
30
2008 2009 2010 2011 2012 2013 2014 2015 2016
EUA
Spot
Pric
e (€
/te
CO2e
)
Source: I C I S Heren, I ntercontinental Exch ange
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4 . 20 1 5 P er f or m a nc e
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Industry Behaviours Charter4
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Figure 7: Industry Key Metrics Scorecard for 2015
20 1 4 A c t u a l 20 1 5 F or ec a s t 20 1 5 A c t u a lProduction (million boepd) 1.64Operating Costs (£ billion)Unit Operating Costs ($/boe)Unit Operating Costs (£/boe)Capital Investment (£ billion) 11.6Exploration Wells Spudded 14Appraisal Wells Spudded < 5
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Figure 8: Production Change from 2014 to 2015
300
350
400
450
500
550
600
Prod
uctio
n (M
illio
n bo
e)
54 5
2014 P roduction
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Existing Field
Decrease
28
2014 Start-Ups
2015Start-Ups
Source: Oil & Gas UK
598
2015 P roduction
4 3
2014-2015R estarts
5
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Figure 9: Average Annual Production Decline from Existing Assets
0%
5%
10%
15%
20%
25%
2005-2006 2006-2007 2007-2008 2008 -2009 2009 -2010 2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
Prod
uctio
n De
clin
e fr
om E
xist
ing
Asse
ts
Source: Oil & Gas UK
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Figure 10: Unit Operating Cost by Company in 2015
0
10
20
30
40
50
60
70
8 0
A B C D E F G H I J K L M N O UK C S AV ER AGE P Q R S T U V W X Y Z AA AB AC AD AE AF
Uni
t Ope
ratin
g Co
st ($
/boe
)
Each b ar represents a company on th e UKC S (eq uity b asis)
UKC S Av erage
Source: W ood Mack enz ie
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Figure 11: Capital Investment by Activity Type
C apital I nv ested in P roj ectsSanctioned prior to 2015
C apital I nv ested in P roj ectsSanctioned w ith in 2015
C apital I nv ested in Existing Assets
C apital I nv ested in P re-SanctionP roj ects
£ 4 .6 billion £ 6.1 billion
£ 0 .5 billion
£ 0 .4 billion
Source: Oil & Gas UK
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Figure 12: Exploration Wells Spudded in 2015
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5. B u s ines s O u t look
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5.1 R eserv es
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Figure 13: Build-Up of the Reserves Base
0
1
2
3
4
5
6
7
8
9
10
Sanctioned @ 1.1. 15 P roduced 2 015 201 5 P roj ect Sanction/ increase in reserv es Sanctioned @ 1.1. 16 P ro b ab le N ew P 5 0 P ossib le N ew
Rese
rves
(Bill
ion
boe)
2015 2016
Sanctioned at
01.01.2015
Sanctioned at
01.01.2016
> P 50-0.6
P roduction
0.51I ncremental
0.8 3N ew
1.13N ew
0.12I ncremental
0.55
P roj ects sanctioned
ov er 2015 and th e increase in
reserv es in existing assets
th rough b row nf ield inv estment
6.28 billion boe
7 .61 billion boe
P rob ab leR eserv es
P ossib le R eserv es
6.33 billion boe
Source: Oil & Gas UK
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Figure 14: Changes in Unsanctioned Reserves
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
P ossib le and P ro b ab le 2 015 Dif f erence in R ese rv es f rom Exisiting P ossib le and P rob ab le P ro j ects Decrease in R ese rv es f rom L oss of P ossib le and P ro b ab le P ro j ects I ncrease in R eserv e s f rom N e w P oss ib le and P rob ab le P roj ects P ossib le and P ro b ab le 2 016
Rese
rves
(Bill
ion
boe)
2015 2016Source: Oil & Gas UK
P ossib le and
P rob ab le at
01.01.2015 P ossib le and
P rob ab le at
01.01.2016
L oss of P roj ects
-1.48
0.45
N ew P roj ects
N et C h ange in R eserv es f rom
Existing P roj ects
-0.073.69 billion
boe
2.59 billion boe
Figure 15: Price Sensitivity of Reserves Removed From Company Plans Over the Last 12 Months
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
$ 100/ b b l and 60 p/ th $ 8 0/ b b l and 48 p/ th $ 60/ b b l and 36 p/ th $ 40/ b b l and 24 p/ th
Perc
enta
ge o
f Rem
oved
Res
erve
s P otentially C ommercially V iab le
Source: Oil & Gas UK
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Figure 16: Reserves by Probability of Proceeding
0
2
4
6
8
10
12
14
J an 05 J an 06 J an 07 J an 08 J an 09 J an 10 J an 11 J an 12 J an 13 J an 14 J an 15 J an 16
Tota
l Res
erve
s in
Com
pany
Pla
ns (B
illio
n bo
e)
Sanctioned
P rob ab le
P ossib le
Source: Oil & Gas UK
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Figure 17: Reserves and Resource Potential by Region
0
2
4
6
8
10
12
W of S N N S C N S SN S, I rish Sea,W est of Scotland
Rese
rves
/Res
ourc
es (B
illio
n bo
e)
Y et T o Find R esources
P otential Additional R esources
P ossib le R eserv es
P rob ab le R eserv es
Ongoing I nv estments
I n P roduction 01.01.2016
Source: Oil & Gas UK, OGA
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Figure 18: Exploration Well Count and Forecast
0
5
10
15
20
25
30
35
40
45
50
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Num
ber o
f Wel
ls Dr
illed
incl
udin
g Si
detr
acks
Exploration Sidetrack s
Exploration W ells
Source: Oil & Gas UK, OGA
W ells
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Figure 19: Appraisal Well Count and Forecast
0
10
20
30
40
50
60
70
8 0
9 0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Num
ber o
f Wel
ls Dr
illed
incl
udin
g Si
detr
acks Appraisal Sidetrack s
Appraisal W ells
Source: Oil & Gas UK, OGA
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2
4
5
6
W ells
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Figure 20: Exploration and Appraisal Drilling by Region
0%
10%
20%
30%
40%
50%
60%
70%
8 0%
9 0%
100%
2010 2011 2012 2013 2014 2015 2016
Prop
ortio
n of
Wel
ls Dr
illed
incl
udin
g Si
detr
acks
N N S C N S SN S W of S I rish SeaSource: Oil & Gas UK, OGA
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Figure 21: Recoverable Reserves Discovered
0
50
100
150
200
250
300
350
400
450
500
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Tota
l Rec
over
able
Vol
umes
Disc
over
ed (M
illio
n bo
e)
Source: Oil & Gas UK, OGA, W ood Mack enz ie
Figure 22: Volumes Discovered per Exploration Well
0
2
4
6
8
10
12
14
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Volu
mes
Disc
over
ed p
er E
xplo
ratio
n W
ell (
Mill
ion
boe)
Source: Oil & Gas UK, OGA, W ood Mack enz ie
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Figure 23: Average Cost per Exploration Well Drilled
0
10
20
30
40
50
60
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Aver
age
Cost
per
Exp
lora
tion
Wel
l (£
Mill
ion
-201
5
Source: Oil & Gas UK, OGA
Mon
ey)
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Figure 24: Development Well Count
0
50
100
150
200
250
300
350
19 9 5 2000 2005 2010 2015
Num
ber o
f Wel
ls Dr
illed
incl
udin
g Si
detr
acks
Source: OGA
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Figure 25: Number of Rigs on the UK Continental Shelf
0
5
10
15
20
25
30
J an-10 J ul-10 J an-11 J ul-11 J an-12 J ul-12 J an-13 J ul-13 J an-14 J ul-14 J an-15 J ul-15 J an-16
Num
ber o
f Rig
s
Semi-Sub mersib le R igs
J ack -Up R igs
Source: N orth Sea R eporter
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Figure 26: Daily Rig Rates Based on Reported Contract Awards for Mobile Drilling Units
0
50
100
150
200
250
300
350
400
450
500
Jan-
06
Jul-0
6
Jan-
07
Jul-0
7
Jan-
08
Jul-0
8
Jan-
09
Jul-0
9
Jan-
10
Jul-1
0
Jan-
11
Jul-1
1
Jan-
12
Jul-1
2
Jan-
13
Jul-1
3
Jan-
14
Jul-1
4
Jan-
15
Jul-1
5
Jan-
16
Rig
Rate
(Tho
usan
d $/
Day)
Semi-Sub mersib le R igs
J ack -Up R igs
Source: N orth Sea R eporter
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2
4
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Figure 27: Liquids and Gas Production
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Prod
uctio
n (M
illio
n bo
epd)
L iq uids
Gas
Source: OGA, Oil & Gas UK
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Figure 28: Production Outlook
0.0
0.5
1.0
1.5
2.0
2.5
3.0
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Prod
uctio
n (M
illio
n bo
epd)
L ow C ase
High C ase
C entral C ase
Source: Oil & Gas UK
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Figure 29: Breakdown of the Central Production Forecast
0
0.5
1
1.5
2
2.5
3
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Prod
uctio
n (M
illio
n bo
epd)
P otential Unsanctioned N ew P roduction
P roduction From P otential N ew Brow nf ield I nv estment
P roduction From N ew Sanctioned Field Start ups (2016 onw ards)
N o Furth er I nv estment Base (Sanctioned) P roduction
Source: Oil & Gas UK
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Figure 30: Average Production by Year per Field, with the Distribution of 2015 Fields
0
10
20
30
40
50
60
70
8 0
19 8 5 19 9 0 19 9 5 2000 2005 2010 2015
Aver
age
Daily
Pro
duct
ion
per F
ield
(tho
usan
d bo
epd)
Source: Oil & Gas UK, W ood Mack enz ie
0
20
40
60
8 0
100
120
140
160
18 0
< 5, 000 5, 000 - 10, 000 10, 000 -20, 000
20, 000 -30, 000
30, 000 -40, 000
40, 000 -50, 000
> 50, 000
Num
ber o
f Fie
lds
Daily P roduction (b oepd)
1, 600
46, 00032, 00023, 000
14, 0007, 000
9 1, 000
Av erage Daily P roduction 2015
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Figure 31: Production Outlook by Region
0
100
200
300
400
500
600
700
2015 2016 2017 2018 2019 2020
Prod
uctio
n (M
illio
n bo
e pe
r yea
r)
W of S SN S, I rish Sea N N S C N S
Source: Oil & Gas UK
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Figure 32: Total Expenditure on the UK Continental Shelf
0
5
10
15
20
25
30
19 70 19 75 19 8 0 19 8 5 19 9 0 19 9 5 2000 2005 2010 2015
Tota
l Exp
endi
ture
(£ B
illio
n -2
015
Mon
ey)
Operating C osts
Dev elopment C osts
Exploration and Appraisal C osts
Decommissioning C osts
Source: Oil & Gas UK, OGA
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Figure 33: Capital Investment Outlook
0
2
4
6
8
10
12
14
16
2012 2013 2014 2015 2016 2017 2018 2019 2020
Capi
tal I
nves
tmen
t (£
Billi
on -
2015
Mon
ey)
P otential Upside f rom P roj ects yet to b e Sanctioned
Sanctioned Only
Source: Oil & Gas UK
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Figure 34: Capital Investment by Field in Year of Approval
0
2
4
6
8
10
12
14
2010 2011 2012 2013 2014 2015 2016
Tota
l Cap
ital I
nves
tmen
t by
Fiel
d (£
Bill
ion
-201
5 M
oney
)
Y ear of Field Approv al Source: OGA, Oil & Gas UK
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Figure 35: Changes in Operating Costs (New versus Existing Fields)
R eduction f rom Existing Fields
C ontrib ution f rom N ew Fields
7.5
8 .0
8 .5
9 .0
9 .5
10.0
2014/ 15 2015/ 16
Source: Oil & Gas UK
9 .7
8 .0
8 .2 8 .2
7.1
7.6
7.0
6.0
Tota
l Ope
ratin
g Co
sts (
£ Bi
llion
)1
2
4
5
6
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Figure 36: Total Operating Expenditure Outlook
0
2
4
6
8
10
12
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Ope
ratin
g Co
st (£
Bill
ion
-201
5 M
oney
)
Source: Oil & Gas UK
R ange
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Figure 37: Unit Operating Cost Outlook
0
5
10
15
20
25
30
35
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Uni
t Ope
ratin
g Co
sts (
$/bo
e -2
015
Mon
ey)
Source: Oil & Gas UK
R ange
1
2
4
5
6
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Figure 38: Supply Chain Turnover
0
5
10
15
20
25
30
35
40
45
2010 2011 2012 2013 2014 2015 2016
Turn
over
by
Supp
ly C
hain
Sec
tor (
£ Bi
llion
)
Seismic
Drilling C ontractors
W ell Serv ices and C ommodities
Sub sea
Engineering, P rocurement, C onstruction and I nstallation
Maintenance and Operations
Source: R ystad Energy
Forecast
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Figure 39: Proportion of Oil Fields Operating at a Loss
0
10
20
30
40
50
60
70
8 0
9 0
100
0% 10% 20% 30% 40% 50% 60% 70% 8 0% 9 0% 100%
Oil
Pric
e ($
/bbl
)
P ercentage of UKC S Oil Fields Operating at a L oss
2014 UKC S Oil Field UOC s
2015 UKC S Oil Field UOC s
2016 UKC S Oil Field UOC Forecast
Source: Oil & Gas UK
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5
6
AC T I V I T Y SUR V EY 2016
p a g e 5 0
Figure 40: Revenues, Costs and Cash Flow on the UK Continental Shelf
-20
-10
0
10
20
30
40
50
60
7019
7019
7119
7219
7319
7419
7519
7619
7719
7819
7919
8019
8119
8219
8319
8419
8519
8619
8719
8819
8919
9019
9119
9219
9319
9419
9519
9619
9719
9819
9920
0020
0120
0220
0320
0420
0520
0620
0720
0820
0920
1020
1120
1220
1320
1420
15
Cash
Flo
w (£
Bill
ion
-201
5 M
oney
)
Gross R ev enue
P ost-T ax C osts
P ost-T ax C ash Flow
Source: Oil & Gas UK, OGA
Figure 41: Free Cash Flow Generation by Company in 2015
-1, 200
-1, 000
-8 00
-600
-400
-200
0
200
400
600
Com
pany
Cas
h Fl
ow ($
Mill
ion
-201
5 M
oney
)
Source: W ood Mack enz ie
p a g e 5 1
ti ti ti
Figure 42: Pre-Tax Rate of Return
0
10
20
30
40
50
60
70
19 9 7 19 9 9 2001 2003 2005 2007 2009 2011 2013 2015
Net
Rat
e of
Ret
urn
(%)
Source: ON S
1
2
4
5
6
AC T I V I T Y SUR V EY 2016
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Figure 43: Cumulative Number of Fields Ceasing Production
0
20
40
60
8 0
100
120
2015 2016 2017 2018 2019 2020
Cum
ulat
ive
Num
ber o
f Fie
lds C
easin
g Pr
oduc
tion
2016 Activ ity Surv ey
2015 Activ ity Surv ey
Source: Oil & Gas UK
titi
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2
4
5
6
AC T I V I T Y SUR V EY 2016
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Figure 44: Cumulative Number of Fields Ceasing Production by Region
0
10
20
30
40
50
60
2015 2016 2017 2018 2019 2020
Cum
ulat
ive
Num
ber o
f Fie
lds C
easin
g Pr
oduc
tion
SN S, I rish Sea
C N S
N N S
Source: Oil & Gas UK
Activity Survey 2015 ti
titi ti
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Figure 45: Annual Decommissioning Spend
0.0
0.5
1.0
1.5
2.0
2.5
2010 2011 2012 2013 2014 2015 2016 2017
Annu
al D
ecom
miss
ioni
ng E
xpen
ditu
re
(£ B
illio
n -2
015
Mon
ey)
Historic Decommissioning Spend
Forecast Decommissioning Spend
Source: Oil & Gas UK
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6. A p p end ic es
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Initiatives are grouped in three work streams:
Business Process
Standardisation
Cooperation, Culture and Behaviours
E�ciency task force – for a more e�cient industry
1
2
4
5
6
AC T I V I T Y SUR V EY 2016
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titi ti
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ti Industry Behaviours Charter . ti
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Industry Behaviours Charter21
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Cross-Sector Efficiency Study ti ti titi ti
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2
4
5
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AC T I V I T Y SUR V EY 2016
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20 1 3 20 1 4 20 1 5 20 1 6 F or ec a s tTotal Production
Oil/Liquids ~
G a s ~ ~
Total Expenditure ~Capital Expenditure ~
Operating Expenditure ~Exploration and Appraisal ~
D ec om m is s ioning ~Unit Technical Cost ~
Unit Development Cost 1 ~
Unit Operating Cost ~Unit Technical Cost ~
Unit Development Cost 1 ~
Unit Operating Cost ~Oil Price (avge) ~
Gas Price (avge – day-ahead) ~
Combined Oil and Gas Price ~
Direct N. Sea Tax Revenues (Fiscal Year)
2 ~ 2 ~ 2
Wells Drilled incl. incl. incl. incl.
ti 15 15 14 ~ ~
14 ~ ~
126 ~ ~
T ot a l 1 64 1 0 2 158 1 0 3 1 55 94
N ew F ield A p p r ov a ls 5 ~
I nc r em ent a l P r oj ec t s 26 ~
New Field Start-ups ~
Exploration Volumes D is c ov er ed ~ ~
1
2 Autumn Statement 2015NB - All expenditures and costs are quoted in money of the day
List of new field development plan approvals by year
ACTIVITY SURVEY 2016
page 60
www.oilandgasuk.co.uk
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OIL &
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