One of the sector’s main challenges is the declining number of new offshore development projects since 2012 and the resultant drop in investment.
New field allowances introduced during 2009 and 2010 largely influenced the surge in development approvals between 2009 and 2012, with 81% of developments approved since 2009 qualified for one of the available allowances.
However, the sharp post-2012, at a time when oil prices were high and stable (at least until September 2014), is a major concern, HW says, and may have far-reaching implications for future investment in and ultimate recovery from the UKCS.
Some of the main factors are: escalating capital and operating costs; poor project execution resulting in significant delays and cost overruns; poor access to export infrastructure; and the technical and commercial characteristics of the undeveloped discoveries.
HW has analyzed 32 potential oil near-term developments (NTDs) on the UKCS with collective contingent resources of 1,600 MMbbl, 60% of which appear economic at oil prices below $60/bbl. The analysis is based on:
- Economic value and commodity price sensitivity;
- Ownership (company size, type and funding source, equity size distribution, materiality, partnerships);
- Technical and operational attributes;
- Funding requirements.
As commodity prices remain weak and uncertainty continues over the timing of the recovery, companies are continuing to focus on cost reduction and supply chain efficiency, HW says.
However, for those seeking to identify investment opportunities created by the prevailing environment (including operators, service providers and financial institutions), these 32 projects could merit their attention.
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