Study highlights benefits of enhanced productivity in UK oil and gas sector

Study highlights benefits of enhanced productivity in UK oil and gas sector

An assessment of prospects for oil and gas recovery in the North Sea has highlighted that substantial reserves remain, but that productivity improvements can greatly enhance the area's long term potential.

The study, authored by Professor Alex Kemp and Linda Stephen from the University of Aberdeen, predicts that in a scenario where oil prices are ‘lower for longer’, economic recovery from the North Sea and elsewhere in the United Kingdom Continental Shelf (UKCS) from 2017-50 could be close to 11 billion barrels of oil equivalent (bn boe). 

Under the same modelling, which predicts an operating environment where capital investment would be lower than in the last decade, the study indicates the remaining unexploited potential in the same period to be between 5 and 5.7 (bn boe).

“The very large unexploited potential indicates both the challenges and opportunities facing the industry,” Professor Kemp said.

“It is clear that a combination of further productivity improvements and oil and gas price increases can make a major difference to the overall economic recovery from the UKCS.

“However, development of the unexploited potential would also greatly enhance the fortunes of the supply chain. 

“In the unlikely event that all the unexploited discoveries were developed by 2050 a further £100 billion of field investment would result, and total expenditures could be increased by over £175 billion. 

“Even the development of 50 per cent of the undeveloped discoveries would make a major difference to the fortunes of the supply chain as well as the economic recovery from the province.”

The study highlights the growing importance of decommissioning in the period, with the sector likely to constitute an increasing share of industry expenditure over the next 20 years.

It also points to the need for an increase in exploration activity - and the likelihood of new discoveries - as potentially having a significant and positive effect on activity and economic recovery in the province.

However, the study makes clear that it is the development of the known but unexploited potential in the UKCS that offers the best hope for maximising its long-term economic potential.

“If productivity can be significantly enhanced the economic recovery from the province can be greatly increased and the supply chain can benefit from a greatly expanded market,” Professor Kemp said.

“But if these productivity improvements are not achieved the prospect with ‘lower for longer’ oil prices is long term decline at a brisk pace.”

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