Modest drop in UK E&A wells, Deloitte predicts

Offshore drilling in UK waters declined by 9% last year, according to Deloitte’s Petroleum Services Group.

Offshore staff

ABERDEEN, UK -- Offshore drilling in UK waters declined by 9% last year, according to Deloitte’s Petroleum Services Group. The analysts’ latest North West Europe Review identified 71 exploration and appraisal well spuds in the UK sector last year, down from 77 wells in 2009.

Graham Hollis, energy partner with Deloitte in Aberdeen, said: “Although the oil price has steadily increased during the second half of 2010, this time last year the economy was still very fragile and it’s likely that economic uncertainty may have played a part in a more cautious approach to drilling schedules for 2010.

“However, the drop from 77 to 71 wells is fairly minimal and last year’s number of wells represents a return to the fairly consistent levels seen throughout much of the last decade. Moreover these figures are in line with what we would expect to see in a more mature region such as the UKCS.

“The 2010 figures show an increase in exploration drilling compared to 2009 and this might be a trend we see continuing in 2011 if the higher oil price continues, as more technically difficult drilling projects become more viable.”

As for asset transfers, Deloitte’s says activity was 60% down last year on the total for 2009, although there were some major acquisitions, such as KNOC’s takeover of Dana Petroleum.

However, the number of UK license farm-ins announced or completed rose steeply from 16 in 2009, when the oil price was lower, to 58 in 2010. Last year’s total was also the highest of the past 10 years.

Graham Sadler, managing director of Deloitte’s Petroleum Services Group, said: “The increased farm-in activity is particularly significant and has been dominated by the independent oil and gas companies in 2010, as they seek to fund their work programs and minimize their financial exposure. This makes sense given the difficult credit conditions that have prevailed until more recently.

“At the same time, it is likely that these farm-ins have presented, to those companies looking to increase the equity they hold in potential reserves, a less risky and less costly method of expanding their portfolios. This strategy may continue in 2011 as cautious optimism returns to the corporate sector more generally and companies in the UK oil and gas sector look to further expand their portfolios.”

01/14/2011

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