Economic Report 1999 Index

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The Exploration Challenge UKOOA recently commissioned Professor Alex Kemp of Aberdeen University to undertake an updated assessment of the likely return on exploration and development activity, based on recent appraisal drilling success rates in the UKCS. The results of the study showed that the average returns from exploration and development activity were unattractive unless a higher proportion of discoveries can be made commercial and life cycle costs are reduced. However, the data also revealed that the industry had identified 78 projects for incremental investment, 54 probable commercial fields and 19 possible fields. The data reflect the importance of current infrastructure to support the additional activity and reinforce UKOOA's belief that there is sufficient exploration potential remaining and scope for activity to continue well into the next century, providing confidence in the attractiveness of the fiscal regime exists. The potential for further exploration success could increase as new areas West of Shetland and beyond are opened for exploration. Although water depths and a tougher environment will offer huge economic and technological challenges the rewards from this frontier area could be substantial. Whilst acknowledging that current activity is fragile, the recent initiatives under the OGITF to reduce costs, apply technology and enhance trading of licenses, together with the continuing partnership with contractors and suppliers to achieve these goals offer the industry the tools to ensure that the UKCS can continue to be a competitive force.