Wod Mac Report Highlights Increased UK Expenditure in 2011

Wood Mackenzie's latest analysis of the UK upstream oil and gas industry finds that the steady recovery seen in 2010 will continue in 2011. Returning confidence will see capital investment nearly double from £4.4 billion in 2010 to £7.7 billion in 2011, leading to a temporary halt in the UK's historic decline in oil and gas production. Furthermore, improved economic confidence and the expectation of a stable, high oil price will lead to a rise in exploration and appraisal (E&A) drilling activity in the UK.
Wood Mackenzie's annual review of 2010 shows that last year, the UK upstream industry continued the slow recovery that began in late 2009. Lead Analyst for the UK upstream research team, Ms. Lindsay Wexelstein explains; 'Looking at the last year, industry confidence was reflected by the success of the 26th Licensing Round, an increase in deal activity and a rise in the number of projects put forward for approval. The returning confidence was also evident in exploration, where drilling was up by 28% with 37 wells spudded, but it was still a long way short of the 56 wells spudded in 2008'
'For 2011, we expect exploration and appraisal drilling to increase as companies' more positive economic outlooks become reflected in their drilling schedules. The UK remains an attractive province and material discoveries are still being made,' Wexelstein asserts.
Despite an increase in drilling activity in 2010, the volume of reserves discovered dropped by 67 million barrels of oil equivalent (mmboe) to 233 mmboe, compared to 2009. Appraisal drilling also dropped by a third - with only 33 wells drilled - as companies shifted their focus back to exploration. Wood Mackenzie notes that key finds in 2010 include the Encore-operated Catcher and the Total-operated Edradour fields.
The review also covers corporate activity and the asset market, as Wexelstein offers; 'Over US$7.3 billion of assets were traded in the most active UK deal market since 2006, with the takeover of Dana Petroleum by the Korea National Oil Corporation (KNOC), accounting for almost half of the total value exchanged. Our analysis shows that growth assets continued to attract buyers throughout the year whereas the slow down in the mature asset market continued.'
'We do not expect a significant shift in the asset market in 2011, meaning deal activity levels are likely to remain at similar volumes to 2010,' Wexelstein says.
Source: Press release