Outlook for the UKCS in 2007

UKCS Oil and Gas Production

Total production of oil and gas was 2.9 million barrels of oil equivalent per day (boepd) in 2006, which was a significant 9% decline given the sustained, increased investment of the past two years. Delays in new projects, the impact of ageing infrastructure and reservoir performance all contributed to this. Production in 2007-8 is forecast to increase to some 3 million boepd, as various new projects have recently or are soon expected to come on-stream. The average decline rate from now to the end of the decade is forecast to improve to 5% per annum, based on current investment plans.

Figure 25: UKCS Oil & Gas Production Forecast 2004-2010

Despite this slower decline rate, average production until the end of this decade is now expected to be 250,000 boepd lower than was forecast in 2005’s survey, ref. Figure 26. Increasing costs have fed through to activity and provided the impetus to switch investment from shorter term incremental production from existing fields to new developments with later dates for first oil / gas.

Figure 26: UKCS Progress in Production Forecasts 2004-2010

Consequently, for the first time since 2002, the forecast has deviated from the PILOT vision of producing 3 million boepd in 2010, as shown in Figure 27. This shift is indicative of reduced confidence among investors - it now looks as though only 2.6 million boepd will be produced in 2010.

Figure 27: UKCS Progress towards PILOT Production Target