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UKCS Outlook Commercial Activity / Asset Trading The asset trading market was very active in 2003 with the value of transactions totalling some £1.3 billion. The sale of BP's interests in the Forties field to new entrant Apache was the most significant transaction of the year, though this was only one of the 27 deals involving commercial fields. The new owners and operator inevitably bring a new perspective on the value of assets, and transfer of ownership typically results in increased investment. This has been demonstrated both when new entrants acquire assets as well as when assets transfer ownership between existing players in the UKCS. The 21st Licensing Round was also notable for the interest shown from a large number of new entrants and start up companies. They were encouraged by the creation of `promote' licenses which offer a reduced work commitment in return for a shorter retention period. The 21st round awarded 88 new licenses of which 53 were promote licenses. Of the 62 companies acquiring interests in these licenses, a record 27 were new entrants to the UKCS. The success of the promote licenses represents a very positive sign that the industry remains upbeat over the future exploration potential of the UKCS. Oil Price in 2003 The average price of Brent Crude in 2003 was $28.9 per barrel (£17.60 per barrel). This was the highest annual price seen since Brent started spot trading in 1987 and some 15% higher in US dollars than the average 2002 price. Whilst there was considerable price volatility in 2003, the price remained strong throughout the year. Figure 8: Brent Crude Price in 2003 The continued weakening of the US dollar against Sterling has, however, meant that the Sterling oil price has remained effectively flat over the last three years, averaging £17.17 per barrel. In 2003, the Sterling price of Brent crude ended the year at £16.87/bbl, nearly £2 lower than at the start of 2003. Costs in the UKCS are predominantly in Sterling rather than dollars. Hence the exposure to the Sterling oil price is also a factor to be recognised in the investment cycle. Figure 9: Historic Crude Prices