Modest Recovery Within UK Upstream Sector Expected in 2017
There will be a modest recovery within the UK upstream oil and gas sector this year, according to global natural resources consultancy Wood Mackenzie.
Although activity was low on the UK Continental Shelf in 2016 as companies were in full survival mode during the oil price downturn and added Brexit uncertainty, there was a change of pace towards the end of the year with the rise in oil price and larger deals signalling a return of confidence, Wood Mackenzie said in its latest report: UK Upstream: 5 Things to Look for in 2017.
The report outlines that growth opportunities, including frontier exploration, small project sanctions and increased mergers and acquisitions look likely this year.
“Exploration and appraisal drilling hit a 50-year low in 2016, but despite this volumes discovered were the highest since 2008," Wood Mackenzie Senior Analyst Fiona Legate said in a statement sent to Rigzone. Last year wells within the UKCS were drilled faster and cheaper on a like-for-like basis versus 2014, Legate added.
Fifteen exploration wells are forecast to be drilled in 2017, which will benefit from the current low-cost environment, Legate said. There is still appetite to drill from a range of players and this year the majors are expected to return to UK exploration, Legate added.
Production on the UKCS is also set for a boost in 2017, with output expected to increase for the third year in a row.
“Fourteen new fields are expected on-stream this year adding to the strong near-term production outlook, although we expect decline will set in again after 2018,” Legate said.
With the second half of 2016 bringing three large deals, signalling higher market confidence, Wood Mackenzie believes that 2017 will be a record year for M&A activity on the UKCS and the biggest year since 2012.
“Majors' divestments and utilities exiting the play will contribute to this. Private equity players are expected to remain big buyers,” Wood Mackenzie said in its report.
Surviving the Downturn
A number of factors helped oil and gas companies weather the downturn within the UKCS.
“Operating costs were slashed to $20.07 (GBP 16.50) per barrel of oil equivalent, down more than 40 percent from the peak just two years ago. This helped a number of companies to survive,” Legate said.
These measures, combined with increased uptime at fields, provided a welcome shot in the arm, despite the difficult operating environment, Wood Mackenzie’s report outlined.
Another ray of light came in the form of cuts to the UK marginal tax rate.
“2016 was an important year for the UK fiscal regime as it was adapted to maximize investment in the ultra-mature sector,” Legate added.
12
View Full Article
WHAT DO YOU THINK?
Generated by readers, the comments included herein do not reflect the views and opinions of Rigzone. All comments are subject to editorial review. Off-topic, inappropriate or insulting comments will be removed.
- ExxonMobil Racks Up Discoveries in Guyana Block Eyed by Chevron
- Oil Market Sentiment Has Improved Significantly
- EU, US Eye Collaboration on Nuclear Materials
- USA Driving Activity to Increase to All-Time Highs
- TC Energy to Sell Prince Rupert Gas Pipeline Project to First Nation
- EU Electricity Export to Ukraine Up 94 Percent in Two Years
- China Coal Output Falls for First Time since Government Ordered More
- BP Pulse Buys One of Europe's Largest Truck Stops
- UK CCUS Plans Outdated: Think Tank
- North America Enters Rig Loss Streak
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- EIA Drops 2024 Henry Hub Gas Price Forecast
- EIA and Standard Chartered Offer Up Latest Oil Price Predictions
- Red Sea Region Sees Another Watershed Incident
- Chevron Oil Project in Kazakhstan to Cost $48.5B
- OPEC Voices Encouragement after IEA Affirms Support for Oil Security
- Biden Govt Bares Strategy for Freight Charging, Hydrogen Fueling Infra
- Rystad Looks at the Buzz Around White Hydrogen
- Ukraine Hits Third Russian Refinery In Escalating Drone Strikes
- VIDEO: Missile Attack Kills Crew Transiting Gulf of Aden
- Norway Regulator Blasts Proposal to Halt New Oil and Gas Permits
- Chinese Mega Company Makes Major Oilfield Discovery
- What Is the Biggest Risk to Offshore Oil and Gas Personnel in 2024?
- Is Peak Oil Demand Close?
- Vessel Sinks in Red Sea After Missile Strike
- JP Morgan, Standard Chartered Reveal Latest Oil Price Forecasts
- Exxon Rights in Stabroek Do Not Apply to Hess Merger with Chevron: Hess
- Rystad Forecasts Net Production of Top Permian Producers in 2024
- Analysts Reveal Latest Oil Price Outlook Following OPEC+ Cut Extension