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UK offshore exploration facing crisis, industry body warns

January 27, 2014

<photocredit>Tomasz Wyszoamirski/iStockphoto/Thinkstock</photocredit>

Oil and gas exploration in the UK Continental Shelf (UKCS) is in a state of crisis and, unless urgent action is taken, the country will not be able to ensure sustainable future production, according to industry body Oil & Gas UK.

The call to action came after the release of two reports highlighting the continued decline in UKCS drilling activity. One of them is the annual review published by consultancy firm Wood Mackenzie and the other contains the latest exploration figures from the Department of Energy and Climate Change (DECC).

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Malcolm Webb, chief executive of Oil & Gas UK, said that both publications illustrated the need for urgent action. UKCS exploration is in a "parlous state" and the downward trend has persisted since 2011, when the number of wells drilled slumped by 50%. In 2013, there were only 15 offshore exploration wells, the DECC says in its report. It is painfully clear that a crisis is threatening UKCS drilling activity and successful resolution will require concerted action by the DECC, the Treasury and industry participants. Unless such action is taken without delay, a few years from now capital expenditure could collapse and adversely affect future production, Webb said.

There are two major factors behind the slide observed during the past couple of years, according to members of Oil & Gas UK. One of them is the availability of drilling rigs and the other has to do with problems encountered by smaller companies in their attempts to secure equity capital, Webb added.

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