A new forecast suggests the amount of oil and gas that could be produced by the offshore industry in the UK has been underestimated, highlighting the potential for a period of growth, according to GlobalData.
The UK Oil and Gas Authority (OGA) believed eight billion barrels of oil equivalent (boe) would be extracted by 2050, but has now increased its prediction to 11.9 billion boe – a rise of almost four billion barrels.
Head of performance, planning and reporting at the OGA Loraine Pace said: “The 3.9 billion barrels identified is great news with 2018 being a productive year.
“New discoveries such as Glendronach and Glengorm highlight the future potential of the basin which could be boosted further with new investment, exploration successes and resource progression.”
Other findings in the latest forecast include a rise in total operating cost of 6.4%, driven by higher activity, while unit operating cost rose only marginally by 2.2%, from £11.4 per boe in 2017 to £11.6 per boe in 2018.
Meanwhile, capital expenditure has fallen for the fourth straight year, but is projected to begin reversing its investment fortunes in 2019 with a 4% increase.
Here GlobalData senior oil and gas analyst Jonathan Markham shares his thoughts the OGA’s revised forecast.
UK oil and gas forecast offers mixed signs
After five years of production growth, the base outlook from the OGA is fairly pessimistic, with production forecast to decline from 2019 onwards.
However, some significant projects could reverse this trend in the medium term and add additional barrels to the production forecast.
Oil fields such as Rosebank and Cambo that Equinor and Shell, respectively, farmed into in 2018 and recent gas discoveries, such as Glendronach and Glengorm, could add more than one billion boe to the production forecast if they receive approval.
Overall, there are nearly two billion boe of recoverable reserves in early-stage announced projects, which are yet to receive approval, that are forecast to have an internal rate of return (IRR) of more than 15%, bringing cumulative production projections close to the OGA’s Vision 2035 targets.
The OGA forecasts that 11.9 billion boe will be extracted between 2016 and 2050, which includes 1.8 billion boe pumped between 2016 and 2018.
This leaves around 10.1 billion boe remaining to produce between 2019 and 2050, of which around 60% is expected to be produced by 2030.
GlobalData estimate the remaining production to be around 60% oil and 40% gas in boe terms.
Development activity in the UK offshore sector is expected to improve after historical lows in the past few years.
There are 16 planned greenfield projects with identified development plans and 29 announced greenfield projects forecast to start production between 2019 and 2025.
These are estimated to cost around $6.7bn (£5.1bn)and $11.4bn (£8.9bn), respectively.
