short note to further clarifying the future potential of North Sea Oil and Gas
Clarifying the Ultimate Potential from North Sea Oil and Gas
Professor Alex Kemp and Linda Stephen, University of Aberdeen
This article sets out to add further clarity to the subject of the ultimate potential recovery of oil and gas from the UK Continental Shelf. To do this we have developed a financial model backed up by a very large field database to project the possible developments to the year 2050. Using a cautious investment screening price of $90 (real) we find that, given some degree of success in implementing the Wood Review recommendations, cumulative production could be 14-15 billion barrels of oil equivalent (bn boe). If targeted tax incentives are introduced following the current tax review the result could be 15-16.5 bn boe.
But the activity will not end then. At the year 2050 there remain many undeveloped existing discoveries containing 2.5-3 bn boe of potentially recoverable oil and gas and further new discoveries made in the period to 2045 with 1-1.5 bn boe of reserves. These are uncommercial at the $90 (real) price, but it is reasonable to expect that a combination of technological progress and higher prices would lead to further developments both before and after 2050. If 50% of the reserves become commercial the total ultimate recovery then reaches 16.75-18.75 bn boe. It is also reasonable to expect that technological progress will increase the field recovery factor from its present average of 45% to much higher levels, both before and after 2050. An ultimate recovery of 16.75-18.75 bn boe is well within the range of DECC’s best ultimate range of 11-21 bn boe, and similarly well within the range of 15-24 bn boe stated by Oil and Gas UK.
DECC also indicate where lies the (high risk) upside potential. It is largely in the West of Shetlands/Atlantic region. Their central estimate has discovered reserves of 3.3 bn boe plus 2.9 billion in the yet-to-find category. In our modelling we project total cumulative production to 2050 of 3.75-3.9 bn boe from this region. Thus, with significant exploration risk, there is a considerable upside potential from this region. DECC also has an upper estimate (i.e. very low probability) of yet-to-find of 6.7 bn boe from this region.
Overall the remaining potential recovery from the UKCS is substantial, but clearly much investment, technological innovation, effective regulation and tax incentives will be required to exploit it. Production should then extend beyond 2060 at relatively low levels.
Author: Professor Alex Kemp