EDINBURGH, UK – Scotland’s decision to remain part of the UK has removed some of the uncertainty for the sector’s offshore asset owners, according to analysts Wood Mackenzie. However, major challenges still need to be addressed.
Production on the UK continental shelf (UKCS) has been in decline since 1999, with growing instances of unscheduled maintenance and project delays and lower than expected recovery.
Recent UKCS exploration has also been disappointing, the analysts adds, with fewer than 330 MMboe of new reserves discovered since 2011. The trend is likely to continue with only 19 exploration wells spudded to date this year.
Although a high-cost environment has added to the complexity of addressing these challenges, a coordinated effort is needed on the part of the UK government and the industry. The recently established Oil and Gas Authority (OGA) will take a more active role in the stewardship of the UKCS.
Wood Mackenzie says companies will seek stability and simplicity around existing fiscal terms as well as tax incentives for harder to produce reserves, to help safeguard the sector’s long-term future.