The OGA’s 2020 UKCS Stewardship Survey closed on the 26th of February with 78 operators contributing to 9 industry themes and over 3,880 data sections. Data from the survey shows that performance in the UKCS has remained positive with some improvements from the previous year.
Carbon Dioxide Emissions
Carbon dioxide (CO2) emissions from offshore installations and terminals in the UKCS decreased by 10%*. This decrease in volumes of carbon dioxide emitted though related to a decline in production, was significantly driven by emissions reduction by operators. The resulting carbon dioxide intensity* of offshore production fell from 21.2 kgCO2/boe in 2019 to 20.2 kgCO2/boe in 2020.
*Verified CO2 emissions reported in scope of the European Union Emissions Trading Scheme
Similarly, total flaring fell by over 20% compared to 2019. While some percentage of this drop in flaring is correlated to production, a significant number of operators reduced their total annual flare, sustaining the decrease throughout 2020.
Resources & Energy Transition
Recent discoveries in the UKCS particularly in the Central North Sea have been high in volume, indicating the quality that the basin still offers and highlighting the need for energy transition-conscious exploration. Data from the 2020 UK Stewardship Survey shows the basin contains 3.6 Bboe in contingent resources, of which 1.9 Bboe are in existing fields and 1.7 Bboe in new developments.
Operators have indicated strong commitments to emissions reduction and electrification towards the UK net zero as a whole, first by achieving 10% emissions abatement with efficiencies in power generation and flaring, and then 25% by low-carbon power generation. Plans for electrification being progressed by collaborations between industry groups and all related regulators further highlight commitment to achieving emissions abatement targets. With this, low carbon infrastructure-led exploration is a positive step in the UK energy transition towards a net zero future.
Production efficiency (PE) was sustained at 80%, reaching the OGA’s PE target for the second year running.
Twin effects of the COVID restrictions and the delayed maintenance of the Forties Pipeline System resulted in a significant increase in deferred planned shutdown days.
Drilling & Wells
Drilling activity in the UKCS took a hit in 2020 with only 8 exploration & appraisal wells drilled. This was the lowest exploration activity in the last eight years with 7 targets drilled resulting in 5 discoveries and culminating in 212 million barrels of oil equivalent resources.
61 development wells were completed in 2020, 14 less than 2019. Average well construction spend, an aggregate of drilling and completion costs, increased in 2020. This increase in spend was, in part, influenced by the number of high-pressure and high-temperature (HPHT) wells drilled.
Effects of the pandemic on operations led to a drop in operating expenses across the basin. Consequently, average unit operating costs (UOC) for the basin fell to £11.1 per barrel. The 2020 UOC - £1 less per barrel than in 2019 - is forecast to rebound in the next few years, exceeding the upper limit of the OGA UOC benchmark boundary by 2023.
Given predictions from the 2020 UK Stewardship Survey data collected in the first quarter, capital expenditure in the basin over the next 5 years is forecast to drop by £2.9 billion. COVID deferrals and the low oil price are suspected key drivers of immediate reductions in expenditure. With project economics re-assessed and modifications for emissions abatement accommodated in applicable projects, current projections already indicate ongoing recovery. Capital expenditure is expected to rebound to previous forecast levels by 2023.
From the survey, it is estimated that well decommissioning accounts for 45% of total decommissioning expenditure. There are 758 inactive suspended wells in the basin, of which 181 are old exploration and appraisal wells dating back to 1967. The number of inactive suspended wells are forecast to double in the next five years, presenting an opportunity for decommissioning cost efficiency driven by commercial transformation.
Recent times have seen 100 to 150 wells decommissioned each year via individual contracts leading to sporadic decommissioning opportunities. As such, well decommissioning is a priority area of focus with the OGA encouraging well decommissioning campaigns. Campaigning could offer cost savings of up to 30% by sharing mobilisation costs and improving expertise by extending operations of the skilled workforce.
Scott Robertson, Director of Operations at the OGA said: “Against the backdrop of a very difficult year, industry did well to maintain positive performance within the basin. 2020 was certainly a unique year for the UKCS and a lot of activity was delayed or deferred during this period due to the impact of the combination of COVID restrictions and low oil and gas prices. In the year ahead it will be important for industry to maintain this level of performance as activity ramps up, both in traditional oil and gas activity as well as the net zero and energy transition opportunities our basin offers.”