The volatile recovery in oil prices, which started from a low of $10/bbl early in 1999, was maintained in 2000. The average price in 2000 was some $28/bbl, which in real terms is less than half the price in 1980. By the end of 2000 the price was near $24/bbl and most commentators suggest that in the medium term oil prices are more likely to be in the range of $15-$20/bbl.
UK gas prices also recovered in 2000. Contract prices averaged 19p/therm-equivalent to $16.50/boe.
Whilst UKCS exploration activity declined to its the lowest for 30 years in 1999 there was a recovery in 2000, resulting in some 37 wells being started.
Development spending in 2000 is expected to be some £3-£3.2 billion, similar to 1999.
The initiatives and industry dialogue stimulated by PILOT have been a significant factor in restoring industry confidence.
Operators' investment intentions indicate a return of industryconfidence suggesting an increase in capital expenditure in 2001-2004 of some £4 billion in sanctioned, incremental, probable and possible field development, over intentions predicted a year ago.
The industry has identified 120 probable and possible new fields which could proceed in the next 5 years, suggesting current record levels of production could be sustained until 2004.
The industry believes that there remain more oil and gas reserves to be produced than the 28 billion boe already produced.
Additional reserves recovery scope from existing fields (Brown Field potential) is estimated at some 4.4 billion boe. With new technology, reduced development costs and continuous improvement in the economic climate, the industry could realise the potential of these reserves.
40% of Brown Field potential is gas and some 50% of this is in the Central North Sea.
Despite the maturity of the UKCS, the success rate for exploration has remained stable from 1996 to1999, averaging some 21%. The average discovery volume is 29 million boe.
Assessment of UKCS reserves discovered in 1996-1999 indicates that almost half are currently non-commercial. Reducing the costs of UKCS development could change this perspective and will enhance the region's attractiveness for global investment. This is a key objective for the industry.
The growth of UKCS gas supply has transformed the fuel mix used in electricity generation. In spite of a 16% increase in the amount of electricity generated, the use of gas in gas-fired power generation has meant that CO2 emissions have declined by 28% since 1990. This improvement is equivalent to a 41% reduction per unit of electricity generated.
Economic Report 2000 Index
