Economic Report 2000 Index

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Industry Activity in 2000 Exploration Activity Year 2000 saw a small recovery in exploration with estimated spending rising to £0.50 billion compared with £0.46 billion in 1999. Only 36 exploration and appraisal wells were started in 1999 (in 1998 the figure was 80). This was the lowest for over 30 years. The downturn in exploration and appraisal activity in 1998/1999 was caused not only by the collapse in oil prices and cash flow, but also the high cost of drilling, the low rate of exploration commercial success, the declining size of new discoveries and the uncertainty caused by the Government's earlier intention to review offshore taxation. The subsequent recovery in oil and gas prices and a general improvement in cash flow and confidence have resulted in some 37 wells (excluding sidetracks) being started in 2000. The outlook for 2001 depends on a combination of factors including containment of the high cost of drilling, increased success in exploration West of Shetland, improved economics for the smaller North Sea prospects and knowledge that the Government will continue to play its part in restoring confidence. Rig utilisation has increased from below 70% in 1999 to almost 90% at the end of 2000. Within that figure certain classes of rig have been fully utilised. However 6 mobile drilling rigs have left North West Europe in the last two years as the focus of exploration activity has shifted to more attractive offshore provinces such as West Africa, Brazil and the Gulf of Mexico. Figure 10 - Exploration and drilling activity: 1991-2000 Figure 11 - UKOOA survey: UKCS capital expenditure 2001-2004