Outlook for the UKCS in 2006

Production

Total production of oil and gas was 3.2 million barrels of oil equivalent per day (boepd) in 2005 which represented a similar decline rate to 2004. This decline was more apparent in oil rather than gas production and can be attributed to some unplanned outages as well as prolonged maintenance shutdowns. UKOOA anticipates a more positive outlook for production from 2006 with several new small projects coming on stream as well the start up of the sizeable Buzzard field (200,000 boepd) towards the end of the year. Total production of oil and gas in 2006 is currently forecast to be in the range of 3.0 million boepd.

Figure 26: UKCS Oil & Gas Production Forecasts 2004-10

Continued investment in the UKCS has the potential to almost halve the production decline rate to the end of the decade from 7% per annum to 4% per annum. The reserves that are on plan to be recovered between 2006 and 2010 have increased by 2% since the 2004 Activity Survey.

Figure 27: UKCS Progress in Production Forecasts 2004-10

It is becoming increasingly likely that the industry will fulfil the PILOT vision of producing 3.0 million boepd in 2010. The Activity Surveys in 2003, 2004 and 2005 have projected 2.4, 2.6 and 2.7 million boepd respectively. In part this is a result of continued exploration and development activity, in part the slippage of production into subsequent years.

Figure 28: UKCS Progress Towards PILOT Production Target

Oil and NGL production in 2005 continued to satisfy UK demand for over the year with recovery of 645 million barrels. Although this represented an 11% decrease compared to 2004, the outlook going forward continues to improve, with a slight increase in production projected over 2007/8. While this is predominantly due to Buzzard coming on stream, recent increases in drilling and new development activity are also contributing.

Figure 29: UKCS Oil Production Forecasts 2004-10

Taking this potential increase over the next couple of years into account, the oil production decline rate to 2010 could now stand at only 2% per annum in comparison to 6% per annum in the previous survey. This is a direct result of the increased investment in development activity that is so apparent and indicates that the UK could still be as self-sufficient in oil out to 2009/10.

85 billion cubic metres of gas were produced in 2005. While this represents a 9% decline on 2004 production, the outlook to 2010 has improved with the decline rate per annum now slightly lower than was estimated last year. Again, continued investment has the potential to almost halve the decline rate from 10% to 6% and UKCS production is still predicted to satisfy the vast majority of UK gas demand at least until 2010.

Figure 30: UKCS Gas Production Forecasts 2004-10

It should be noted that only 80% of the oil and gas production forecast in 2010 is from currently sanctioned investments. This is particularly relevant for gas when at a time of concern over security of gas supply investment decisions are still to be made on 20% of gas production through to the end of this decade. Investment decisions will be impacted by the commercial, regulatory and fiscal environment as well as the competitiveness of the province.