ABERDEEN, UK – Drilling activity offshore the UK increased by 64% in 2Q 2012 compared to the same period last year, according to Deloitte. Eighteen exploration and appraisal wells were drilled on the UK continental shelf between April 1 and June 30.
Transactions for oil and gas fields rose 47%, compared to 2Q 2011. Field development approvals and start ups were also higher.
Graham Sadler, managing director of Deloitte’s Petroleum Services Group, said: “We have some way to go before we are back to the levels seen in 2009 and 2010; however, the positive announcements in the government’s March budget with regards to the extension and change in field tax allowances should encourage further exploration, appraisal, and development activity.
“Furthermore, the announcements made to provide more certainty on the decommissioning tax relief, if implemented, should allow companies to recover cash flow previously tied up in financial guarantees for further investment across the UKCS…
“While we will have to wait until next year to see the full impact, the highly competitive 27th licensing round is likely to trigger more exploration and appraisal commitment from companies who are putting down plans for the next two to three years. With an improved fiscal environment and steadily high commodity prices, it is reasonable to assume that we will see an expansion on the exploration campaigns started during the last quarter.”
So far this year, Deloitte reports, eight new fields have come onstream in the North Sea, higher than the total number of field start ups in 2011 and more than double those of 2009 and 2010.
As for deals, there were 25 UK offshore asset transactions in 2Q 2012, eight more than during the same period last year.
“There has also been a reversal in the type of deals being made,” said Graham Hollis, energy partner at Deloitte. “A year ago deals were strongly dominated by farm-in activity (where companies offer a percentage in a field to potential partners or investors) as companies looked to spread risk and financial commitments…Instead, we have seen a 58% rise in the number of asset transactions (fields being bought and/or sold) across northwest Europe, as companies feel the benefit of increased liquidity, and are increasingly willing to take risks and spend money on full asset acquisitions.”