EIC INSIGHT REPORT

UPSTREAM
UKCS MARKET FOCUS
July 2018
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Energy Industries Council
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CONTENTS

Contracting activity
page 4

Global overview................................................. page 5

FEED contract activity....................................... page 6
EPC contract activity........................................ page 9
Subsea/SURF contract activity....................... page 12

Summary........................................................ page 15

Market focus: the UK Continental Shelf

page 16

Overview..........................................................page 17
Legislation and authorities.............................. page 18
Operator mergers and acquisitions................. page 20
Contractor mergers and acquisitions.............. page 21
Exploration..................................................... page 22
Offshore developments................................... page 25
Southern North Sea........................................ page 27
Decommissioning............................................ page 28
UK shale......................................................... page 29
Summary........................................................ page 34
CONTRACTING
ACTIVITY
Global overview 140

During 2017, a total of 420 120

contracts were awarded across 100
252 upstream projects, in 52
countries. In comparison, 422 80
contracts were awarded in 2016.
60
The figures show a very slight
decline in contracting activity 40
globally from 2016 to 2017.
20

Figures 1 and 2 show that 0

contracting activity has declined

ia

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notably in North America and las

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Europe while revealing an increase

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in activity in the Middle East.

No

So
Despite a drop of 16 contracts ian
Ind

from the previous year, Europe

again has the highest number of
awarded contracts in 2017. The Figure 1
reduction in activity is due to the
Contract awards by region 2017.
lower oil price environment and
a cut in global upstream CAPEX
spending.
160

The majority of activity in 140

Europe during 2017 has been 120
associated with developments on
the Norwegian Continental Shelf 100
(NCS) and the UK Continental 80
Shelf (UKCS). The NCS accounted
60
for the highest number of major
contract awards in Europe and 40
globally (Figure 3). Norway is one 20
of the eight countries that saw an
0
increase in awarded contracts,
increasing from 27 in 2016 to 35
ia

a
ia

st
pe

a
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ic
As

las

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in 2017. The high contract activity

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idd
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Au

rth

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in 2017 was due to front end

M
su

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No

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ian

engineering and design (FEED)

Ind

activity where multiple awards

were made on projects such as
Fenja, Johan Castberg, Johan Figure 2
Sverdrup and Skarfjell. With this
Contract awards by region 2016.
high activity of early engineering
comes the potential for the award
of engineering, procurement and Activity levels on the UKCS As operators are becoming
construction (EPC) contracts increased from nine major awards accustomed to the low oil price
further down the line. in 2016 to 10 awards in 2017. contracting activity is stabilising

5
CONTRACTING ACTIVITY

40
35 2016

30 2017

25
20
15
10
5
0
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Figure 3

Major contract awards by country during 2016 and 2017.

accordingly. The awards are
largely attributed to major
developments such as Cheviot,
Greater Lancaster and Tolmount
where there were multiple awards.
The Asia and Middle East markets
saw significant increases in major
contract awards when comparing
2016 and 2017 (Figures 1 and 2).
The high activity in Saudi Arabia is
largely due to the Berri, Hasbah,
ACTIVITY LEVELS ON THE
UKCS INCREASED FROM 9
MAJOR AWARDS IN 2016
TO 10 AWARDS IN 2017
Marjan, Safaniya and Zuluf fields
brownfield developments where
there were a total of seven awards
made.
As shown in Figure 3, contract
awards in Africa were dominated
by developments on the west
coast. However, it is no longer
just Nigeria and Angola that
dominate the contracting activity
within the region. Angola does
not even make the shortlist for
major awards and Nigeria only
saw two major contract awards
in 2017. With six awards in 2017
Ghana saw the most significant
activity in the region largely due
to four competitive FEED awards
on Hess’ Pecan oil discovery. The
high capital investment common
to Angola and Nigeria is a driver to
this change in trend as the industry
looks to neighbouring countries for
development options with lower
costs.
FEED contract activity
In 2017, a total of 42 upstream
FEED contracts were awarded
across 15 countries, which is
the same amount as in 2016. As
shown in Figure 4, there has been
a shift in the areas where FEED
contracts have been awarded.
The biggest increase in number
of FEED contracts awarded for
2017 was in Norway. This high
activity was due to multiple
awards on major projects such as
Fenja, Johan Castberg and Johan
Sverdrup.
VNG Norge awarded contracts for
two competitive FEED contracts
for the Fenja field, the first of which
is for subsea umbilicals, risers and
flowlines which will be conducted
by TechnipFMC and Subsea 7. The
competitive FEED study for the
subsea production system will be

6
 18
16 2016
14 2017
12
10
8
6
4
2
0

Trinidad and Tobago

Egypt
Australia

Canada

Ghana

Saudi Arabia
India

Malaysia

Romania
Kazakhstan

United Kingdom (offshore)

Falkland Islands (Malvinas)

Vietnam
Qatar
Norway

USA
Brazil

Israel
Iraq

Kuwait

Mozambique
China

Guyana

Nigeria

Uganda
Azerbaijan

United Arab Emirates

Denmark

Figure 4

FEED awards by country during 2016 and 2017.

carried out by TechnipFMC and the processing platform’s jacket, of an engineering, procurement,
Aker Solutions. Kvaerner is regarded as favourite construction, installation and
to win the jacket fabrication commissioning contract is
The Johan Sverdrup phase II contract. expected to take place in May
development saw three major 2018. The draft field development
FEED awards with the power The UK also saw significant activity has also been submitted to the
supply from shore, Jacket and with five FEED contracts awarded, UK Oil & Gas Authority (OGA).
processing platform being awarded two more than the previous year. Alpha Petroleum awarded a
to Siemens, Kvaerner ASA and Aker Three of these contracts were FEED contract to Teekay for
Solutions, respectively. The project awarded on the Tolmount gas field. work on retrofitting the Varg
will include five subsea templates, The major contract for topsides, floating production storage and
with half of the wells being water jacket and pipeline went to Wood offloading vessel (FPSO). Alpha
injectors and the remainder being while the award for the beach has also entered into an exclusive
producers. Asian yards are already crossing and onshore work went to agreement with Teekay and during
positioning themselves for the Land and Marine Engineering and the FEED period will negotiate
phase II topsides bid process, with Costain, respectively. The project a lease and operate contract
the size of the platform favouring is now looking to move into the for the entire life of Cheviot.
Korean yards like Samsung Heavy EPC phase with three companies Following delays Alpha Petroleum
Industries - currently building competing to build the platform, is targeting a final investment
the phase I integrated deck - which are Heerema Fabrication decision (FID) on the project
and Hyundai Heavy Industries. Group, Kvaerner and Rosetti. before the end of June, which is
Following on from FEED work on Project sanction and the award likely to mean first oil in 2020.

7
CONTRACTING ACTIVITY

Ghana also saw an increase in 6

activity when compared to 2016.
5
Following on from INTECSEA’s
work on the pre-FEED, Hess invited 4
four FPSO contractors: Bumi 3
Armada, Modec, SBM and Yinson
2
to tender for the FEED contract.
It is understood that all of these 1
contractors are all set to submit
0
commercial bids early in 2018 for

ts
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ion
MC
the EPC component of the project.

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However, it was announced in

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early 2018 that Aker Energy had
er

or
Ak

s
or

Ga
Flu
proposed a US$100m acquisition

d
an
of Hess’ Ghana assets. This may

il
sO
have implication for the projects

si
ne
Ge
development timeline.

Total’s Lake Albert development

also made significant progress
with the operator confirming that
CB&I and Fluor were the two
contractors that will undertake
a competitive FEED bid on the
onshore central processing facility.
TechnipFMC was excluded from
the bidding process by Total. CB&I
and Fluor are obliged to submit
technical bids and as part of the
proposal, they must provide a
commercial contract model to use
for eventual EPC bidding.
Elsewhere FEED activity has been
low during 2017, with several
countries that experienced FEED
THE BIGGEST INCREASE
IN NUMBER OF FEED
CONTRACTS AWARDED
FOR 2017 WAS IN NORWAY
Figure 5
Top FEED contractors during 2017.
activity in 2016 not maintaining
similar activity levels in 2017.
Notably, the USA had no FEED
contract awards in 2017 compared
to six in 2016. It is a similar story
for Malaysia and Nigeria which
both had three awards in 2016 but
none in 2017.
Top contractors
Figure 5 shows that Wood was
again the most successful
contractor along with Aker
Solutions, with the both of them
winning six contracts each. One of
the notable awards for Wood was
the FEED contract for the subsea
flowline system on Snorre 2040
with the engineering being carried
out of Wood’s Stavanger office.
Statoil confirmed at the end of
2017 that it had submitted the plan
for development and operation to
the Norwegian authorities for the
expansion project. Aside from the
awards on Fenja and Sverdrup,
Aker’s most significant award
for 2017 was arguably the FEED
contract for the Troll phase three
development. The module will be
installed on the Troll A platform on
the North Sea field to receive and
process gas from the Troll West
satellite. Aker also has an option
for engineering, procurement,
construction and installation of the
module under the deal.
TechnipFMC was just behind
Wood and Aker in 2017 with four
FEED contract awards. As already
detailed two of these awards were
for competitive FEED awards on
Fenja and the competitive study
for the Lake Albert development.
However, the contractor also won
a significant contract on the Tanin
and Karish gas field development
offshore Israel. TechnipFMC was
awarded the concept and FEED
contract for the project which is

8
 9 to the Berri, Hasbah, Marjan,
8
Safaniya and Zuluf brownfield
developments. Dynamic Industries,
7 Eversendai Offshore, McDermott
6 International, National Petroleum
5
Construction Company and
Saipem all won EPC contracts on
4 the project. These awards form
3 apart of Saudi Arabia’s Long-
2
Term Agreement which has now
awarded over US$5bn worth of
1 deals since the start of 2016.
0
The first of McDermott’s awards
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was for the design, procurement,

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fabrication, transportation,
ley
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SB
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installation, testing and pre-

W

commissioning of nine slipover

Figure 6
Top FEED contractors during 2016.
expected to involve an investment
of around US$1.3–1.5bn. Energean
Oil & Gas is intending to fast-track
the development of the Karish
field, which will then be followed by
the development of the Tanin field.
Two significant awards were also
made to Fluor during 2017. In
addition to the Lake Albert award
the contractor was also selected
by BP to carry out the FEED for the
Cassia C platform. As BP required
a lump-sum turnkey cost estimate
from the FEED bidders, Fluor stands
to gain an advantage when bidding
for the EPC contract. The Cassia C
project is the third platform at BP’s
operations in the Columbus Basin
off the coast of Trinidad.
EPC contract activity
A total of 80 EPC contracts were
awarded during 2017 across 17
countries. In comparison 56 EPC
contracts were awarded in 19
countries during 2016. Figure 7
highlights the increase in EPC
contract activity across the globe
from the previous year, particularly
in Saudi Arabia, Norway and
Indonesia.
Saudi Arabia’s increase from seven
contracts in 2016 to 10 contracts
in 2017 can largely attributed
IN AN INDUSTRY FIRST BHGE
WAS AWARDED A FULLSTREAM
CONTRACT ON THE PASCA GAS
FIELD IN PAPUA NEW GUINEA
jackets and decks, subsea
pipelines and cables, as well
as the associated demolition of
certain facilities, in the Safaniya
field. The contractor also won a
second award for the provision
of the full range of engineering,
procurement, construction and
installation (EPCI) services,
including design, fabrication,
installation and pre-commissioning
of nine slipover jackets, 10
production deck modules, an
electrical distribution platform and
associated cables and pipelines.
Saipem’s two awards on the
project were for the design,
engineering, procurement,
construction and installation of
19 jackets as well as a trunklines
and installation. The first is an
EPCI contract for nine offshore
jackets at the Hasbah, Marjan and
Safaniyah fields. The second is
an EPCI contract for 10 offshore
jackets at Berri, Marjan and
Zuluf. The latter of which Saipem
subcontracted to Eversendai
Offshore with initial delivery
expected in 2018.

9
CONTRACTING ACTIVITY

12
2016
10
2017
8

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Figure 7

EPC awards by country during 2016 and 2017.

McDermott was the most
successful EPC contractor in
Saudi Arabia winning a total of
three awards. Aside from the two
contracts already mentioned,
the contractor also won an EPCI
contract for 10 slipover platforms
to enhance production at the
Safaniya Oil Field Upgrade project.
It will also cover the installation of
an electrical distribution platform.
Norway also saw an increase
in activity, up from seven
awards in 2016 to nine in
2017. Statoil awarded two of
the major EPC contracts for
Johan Castberg. Sembcorp will
carry out construction of a hull
measuring 295 metres long and
55 metres wide, as well as the
accommodation module for 140
personnel, under a US$490m
turnkey contract. SBM Offshore
won the contract to provide the
turret mooring system for the
FPSO. The turret will be delivered
in modules in early 2020 and will
have the capacity to accommodate
21 risers on the vessel. Kvaerner
was awarded a contract to supply
both the topsides and jacket for
the project with the contract worth
around US$119m. Statoil awarded
Aibel a US$74m contract to build
the new gas module. Engineering
will be performed at Aibel’s Bergen
offices with fabrication to be
carried out at its main Haugesund
yard in western Norway, with
work already under way and due
to be completed in time for the
scheduled start-up of the module
at the end of 2019.
While activity increased from
the previous year, the UK still
only saw two EPC contracts
awarded in 2017. In an interesting
contract model Siccar Point
Energy and Baker Hughes, a GE
company (BHGE) are teaming up
to develop the Cambo field. BHGE
will support the appraisal and
early production of the project
and may extend its work into the
full field development. BHGE is
expected to offer a full suite of
well services for the appraisal well
and expansion. The company will
also provide and install subsea
production equipment and flexible
pipes in partnership with Ocean
Installer for the field’s early
development phase. The Otter field
which is a 30-km subsea tie-back
to the North Cormorant platform,
TAQA awarded the EPC contract to
OneSubsea. OneSubsea will supply
and install a subsea multiphase
boosting system including topside
and subsea controls, as well as
associated life-of-field services.
Having seen no awards in 2016,
Canada saw five EPC contracts
awarded in 2017. Two of these
awards were made on Husky’s

10
West White Rose Extension 8
project. Kiewit Offshore was 7
awarded the contract to fabricate
6
the Wood designed topsides for
the project. Allseas will handle 5
transport of the topsides from a 4
nearshore dock in Newfoundland 3
out to the West White Rose field
2
using the Pioneering Spirit vessel.
A joint venture (JV) of Dragados 1
Canada, SNC-Lavalin and 0
Pennecon was awarded the EPC
L a orp an y

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contract for the concrete gravity

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structure for the fixed drilling
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platform. Two contracts were
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also awarded for ExxonMobil’s

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decommissioning of the Sable

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field. Halliburton was contracted Na ok

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to provide plug and abandonment

(P&A) equipment, services and
personnel. Work was also awarded
to Heerema to remove the Figure 8
platforms.
Top EPC contractors during 2017.

Top contractors
5
As seen in Figure 8 the top
contractor for EPC awards in 2017 4
was McDermott with a total of
seven contracts. As well as the 3
contracts won in Saudi Arabia,
the contractor also won work on 2
Maersk’s Tyra project. One of
the contracts was for the Tyra 1
East G platform’s gas processing
topsides. McDermott will also 0
fabricate six module support
er

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ad
.

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frames to raise the existing

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platforms to counter seabed

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subsidence.
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TechnipFMC was the second

ne
Hy
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most successful contractor

L&
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na

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Y&

with a total of six EPC awards.

Na

TechnipFMC secured the pipeline

contract for the Leviathan
field which will cover a pair of Figure 9
117km pipelines taking gas and
Top EPC contractors during 2016.
condensate to a fixed platform

11
CONTRACTING ACTIVITY
12
10
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US
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Figure 10
Subsea/SURF awards by country during 2016 and 2017.
installed on Israel’s Continental
Shelf which is about 10kms
off the coast. In addition, the
contract covers the installation
of two 10km pipelines, a six-inch
condensate line and a 32-inch
gas line which will run between
the fixed platform, located in 86
metres of water, and the shore.
TechnipFMC also won a contract
for the project management,
engineering, supply, construction
and commissioning for the
onshore receiving facilities at
Eni’s Cape Three Points Block. It
is understood that the contract
will be mainly executed by
TechnipFMC’s team in Ghana.
The merger between Baker
Hughes and GE Oil & Gas (BHGE)
during 2017 led to a number
of significant awards for the
contractor. One of the most
interesting of these awards was
on the Pasca gas field in Papua
sia
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ija
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Ind
ya
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ba
ala
on
Gu
er
Ind
Az
New Guinea where BHGE was
awarded a fullstream offering,
from appraisal through to
commissioning. The agreement
which was an industry first
covers services and equipment
during phase I of the Pasca field
development, including drilling
services, wellheads and pressure
control equipment for the fourth
and final appraisal well. Post FID,
BHGE is expected to provide an
integrated gas processing solution
from the wells through to point of
export. BHGE also won a contract
to provide an advanced modular
gas processing (natural gas liquids)
plant for the Nasiriyah oil field
operated by Basra Oil Company.
In line with the agreement the
contractor will develop advanced
solutions for flare gas at the
Nassiriya and Al Gharraf oil fields,
using modular gas processing
technology developed in the United
States.
12
2016
2017
la
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go
L ib
Br
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An
am
oz
M
Subsea/SURF
contract activity
A total of 34 subsea/subsea
umbilicals, risers, flowlines (SURF)
contracts were awarded across 16
countries in 2017, decreasing from
47 contract awards in 16 countries
in 2016. Figure 10 shows that there
is a similar trend in contractors
that saw the most subsea/SURF in
activity in 2016 and 2017.
Despite a slight decrease in
activity, Norway remained the
country with the most subsea/
SURF contracts awarded. Two of
the contracts were awarded on
the Statoil’s Snorre 2040 project
which is being developed as a
subsea solution with six subsea
templates with 24 well slots tied-
back to the Snorre A platform.
TechnipFMC was awarded the first
contract which covers the delivery
of subsea production systems and
includes six subsea templates and
subsea production equipment.
The second subsea/SURF contract
was awarded to FMC Kongsberg
Subsea, worth nearly US$240.6m
for the supply of the subsea
production system. The agreement
covers six subsea templates and
subsea production equipment for a
total of 24 wells.
Aker Solutions was awarded a
contract from Aker BP to deliver
the subsea production system
for the first phase of the Ærfugl
development. The subsea system
will include wellheads, vertical
subsea trees, a tie-in module and
an umbilical riser base. The first
phase of Ærfugl includes three
production wells and is scheduled
to start in the fourth quarter of
2020. On the same project Subsea
7 won the contract to provide the
tie-back involving the application
of Subsea 7’s Electrically Heat
Traced Flowline (EHTF) technology
for the 21km tie-back to the Skarv
FPSO. Fabrication of the EHTF
system will take place at Subsea
7’s spoolbase at Vigra, Norway.
On the Utgard Subsea Tie-Back
project Statoil awarded OneSubsea
a subsea/SURF contract to supply
the subsea production system. The
scope includes a subsea template
manifold system, two subsea
wellheads and vertical monobore
subsea trees, a production
control system, and associated
intervention and workover tooling.
Activity in the US saw five awards
in 2017 which was the same
as 2016. Two of these awards
were for work on BP’s Mad Dog.
Wood was handed a contract to
provide subsea engineering and
project management services on
the Mad Dog project. The work
includes gas lift system interface
design, geospatial information
system support, subsea controls
engineering and geotechnical
engineering support. The contract
for subsea umbilicals, risers and
flowlines for the project was
awarded to Subsea 7. The contract
also includes associated subsea
architecture for the project. Mad
Dog will be the first project in the
US to use Subsea 7’s Swagelining
polymer lining technology. Subsea
7’s Houston office will be the base
for engineering activity for the
project with installation activities
expected to take place in 2019 and
2020. Oceaneering International
has been awarded additional work
from Shell for the Appomattox
project. The contract award
includes ancillary flowline hardware,
flowline jumper fabrication and
installation, manifold installation,
and subsea buoyancy fabrication
and installation.
The UK saw a decrease in subsea/
SURF activity with three awards
in 2017 compared to five in
2016. TechnipFMC was awarded
MAD DOG WILL BE THE FIRST
PROJECT IN THE US TO USE
SUBSEA 7’S SWAGELINING
POLYMER LINING TECHNOLOGY
13
a contract to provide umbilicals,
risers, flowlines and the subsea
production system for the Greater
Lancaster Early Production System
project. In addition, TechnipFMC will
also install the subsea equipment,
turret buoy and mooring system.
Alpha Petroleum awarded a major
contract to BHGE to provide
integrated well construction
services for the development of
the Cheviot field. The work scope
will initially cover 18 wells, with the
potential to increase to 23 wells
as the development progresses.
BHGE has said that work is due to
start date in the second quarter
2018, subject to Alpha sanctioning
the project. It is understood that
Alpha is still aiming to take an FID
on Cheviot by June 2018, with first
production earmarked for 2019.
The final subsea/SURF award in
the UK went to DeepOcean who
received a call-off under a new
master service agreement with BP
on the Foinaven field. The call-off
covers the installation of a new
flexible water injection riser and
the recovery of the existing water
injection riser in the Foinaven
field, West of Shetland. The work
includes project management,
engineering and logistics. The
onshore project team will work
out of DeepOcean’s offices in
Aberdeen and Haugesund, Norway.
Top contractors
As shown in Figure 11, TechnipFMC
was clearly the most successful
subsea/SURF contractor during
2017 in terms of number of
contracts awarded. Susbea 7
received awards across a number
of regions with multiple awards
CONTRACTING ACTIVITY

in North America (two), South 9

America (two) and Europe (three).
8

The awards in North America 7

include one for the West White 6
Rose project. In addition to this
5
contract TechnipFMC has been
awarded a contract by Shell 4
on the Kaikias subsea tie-back. 3
Following Shell’s FID on the project
2
in February 2017, TechnipFMC was
awarded a contract for the delivery, 1
integration and installation of the 0
subsea production system and

l
e
7

ad
ea
MC

na
subsea riser, jumper and flowline se

rg
ea

rh
bs
t io
ub

No
pF

Be
Su
na
equipment. TechnipFMC also won
Su
ni

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ch

er

gy
er
On

ho

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er
Ak
a major award in South America
fs

tI

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ot
for work on the Liza oil field. The m

ra
p

pu
ni

er
ch

cD

Sa
agreement is for TechnipFMC to
Te

supply 17 deep water trees and

tooling, as well as five manifolds
and tie-in equipment. One of Figure 11
TechnipFMC most significant
Top subsea/SURF contractors during 2017.
awards was for the Coral FLNG,
where in a JV with JGC and
Samsung Heavy Industries, to 9
handle the subsea umbilical, riser
8
and flowline work.
7
BHGE and Subsea 7 were joint 6
second for number of subsea/SURF
5
contracts with both being awarded
four contracts each during 2017. 4
3
BHGE was awarded a contract on
2
Petrobel’s Zohr field to provide
the subsea production system 1
and support for installation,
0
commissioning and start-up.
l
e
7

ad
ea
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BHGE will provide support from

se

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ea

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t io
ub

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Su
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its Egypt, UK, Norway and Italy

Su
ni

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ch

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On

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offices. The scope of work

fs

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includes project management,

m

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ch

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engineering procurement,
Te

fabrication, construction, testing

and transportation of a subsea
production system, including Figure 12
seven manifolds, tie-in systems,
Top subsea/SURF contractors during 2016.
long offset subsea and topside

14
control systems, SemStar5 HIPPS
(high integrity pressure protection)
systems, workover systems
and tools, and will support the
installation, commissioning and
start-up operations. BHGE will
also provide 10 Christmas trees,
manufactured at its subsea centre
of excellence in Aberdeen, Scotland.
Subsea 7’s awards included
contacts on the Mad Dog, Valhall
Western Flank and the Sole gas
field projects. In addition, Cooper
Energy awarded Subsea 7 a
contract for a subsea tie-back to
the Orbost gas plant, including the
fabrication and installation of 64km
of pipeline, spool and manifold,
with installation of a 64km umbilical
and the commissioning of the
system. Project management and
engineering will be carried out from
its Perth office in Australia.
Summary
The data shows that there has
been a very slight reduction in
contracting activity in 2017, when
compared to 2016. Key upstream
areas such as Norway and Saudi
Arabia actually saw a significant
increase in activity for 2017. It was
countries such as Egypt, Malaysia
THERE WILL BE UP TO 42
PROJECTS SANCTIONED IN
2018 COMPARED TO 21 IN 2017
45
40
35
30
25
20
15
10
5
0
2016 2017
Figure 13
Graph showing FIDs taken and expected 2016–19.
and Australia which saw the
significant drop of in activity for
2017. The drop in activity is largely
due to unusually high activity in
2016 within these areas.
Norway’s success in 2017 is
undoubtedly due to major projects
such as the Johan Castberg,
Johan Sverdrup and Snorre
2040. However, few projects are
expected in the near-term to replace
these developments, leading to
an expected decline in contract
activity. The UK on the other hand
is expecting a significant increase in
FIDs and contracting activity with up
to 14 FIDs for 2018.
Figure 13 shows that there will be up
to 42 projects sanctioned in 2018
compared to 21 in 2017. Europe will
see up to 19 projects sanctioned,
more than any other region. This is
15
Taken
Expected
2018 2019
largely due to the high activity on
the UKCS. The region could see high
value projects sanctioned such as
Exxon’s Neptun project in Romania
and Statoil’s Johan Sverdrup phase
II. This high number of proposed
FIDs and the associated detailed
engineering awards that follow is
a very positive sign for the supply
chain. Projects expecting FID in 2019
is relatively low at only 12. However,
as projects progress during 2018,
several projects have been added to
the figure.
The announcements from
operators of an increase in
upstream CAPEX for 2018 can
only have a positive effect on
contracting activity globally in the
near future. Decisions within OPEC
and stability in the oil price will
also be key for investor confidence
and future contracting activity.
 MARKET FOCUS:
THE UK CONTINENTAL SHELF
Overview

With oil prices rallying above

US$60/barrel towards the end of
2017 there has been reason for
optimism across the oil and gas
industry. The increase in oil price
is largely due to an OPEC supply
cut and increased Asian demand.
If these higher prices remain and
recent efficiency improvements
across the UK sector are
maintained, activity on the UKCS
may rise.

Operators working on the UKCS are

collectively forecast to generate
more than £5bn of free cash flow
in 2018 if the rebound in oil prices
persists around current levels.
That would mark an encouraging
turnaround from the past four
years, when companies’ costs
exceeded revenues as they battled
against falling oil prices. Costs
were exceeding revenues even
before the oil price crash that
began in mid-2014, with companies
collectively having negative free
cash flow in 2013, with North Sea
operators running up some of the
highest operating expenses in the
world. The slump in crude prices
pushed operators to cut costs, and
average unit operating expenses
in the basin have almost halved in
the past two years, from US$29.70
a barrel to US$15.30. This has led
to optimism that the North Sea Figure 14
industry may finally be turning a
All 13 UKCS developments looking to take FID in 2018. Note that all developments are
corner and the basin has witnessed
in close proximity to existing infrastructure. * Penguins FID taken January 2018.
a flurry of deals in the past year. Source: Base map taken from OGA.
These include a number of private
equity companies such as Chrysaor
and INEOS acquiring several assets reduced project investments during Energy’s Lancaster early production
from majors. the downturn. In 2017 only two field system. However, the outlook for
developments were sanctioned – 2018 is much more positive with up
Alongside cuts to operating Statoil’s Norwegian-UK cross-border to 13 new projects set to receive
expenses, North Sea operators Utgard scheme and Hurricane FIDs from operators (Figure 14).

17
MARKET FOCUS: THE UKCS
The first of these projects to be
sanctioned has already been
confirmed, with Shell taking an FID
on the Penguins Redevelopment
project.
While a relatively high number of
project sanctions are expected in
2018, the longer-term outlook for
production is less clear. The UK
North Sea is set to face another
significant production decline in
the early part of the next decade if
new capital cannot be secured this
year. North Sea production had
been in a protracted decline, with
output falling between 2000 and
2015. Production started rising
again two years ago as a result of
projects authorised by operators
before the downturn. Investment
decisions made by operators in
2018 and 2019 will be critical to
maintaining production levels in
the future. Further exploration
success will also play a key role
in replacing reserves and limiting
production decline in the basin.
The OGA estimates the overall
remaining recoverable reserves
and resources on the UKCS
range between 10 and 20bn
barrels of oil equivalent (Bboe). It
estimates there are approximately
5.7Bboe of proven and probable
UK reserves. If these figures are
accurate the UKCS technically has
the capacity to sustain production
for at least the next two decades,
and this does not consider
potential future exploration
successes.
Innovating new opportunities
still exist on the UKCS. It is
encouraging, for instance, to see
Hurricane Energy taking an FID
on the Lancaster early production
system which is the first ever
basement reservoir development
in the North Sea. The project
could open up a whole new hub
in the West of Shetland region,
the area with the most untapped
resource potential. Likewise,
drilling in the Southern North Sea
by BP and Perenco could unlock
a new carboniferous opportunity.
Equally encouraging are measures
taken by the UK government to
encourage investment into the
basin such as the transferable
tax history, allowing late life
buyers to offset the costs of
decommissioning against the
transferable tax history.
Legislation and authorities
The stated policy of the UK
government is to maximise
the cost-effective recovery of
UK resources. In response to
the decline in production from
the UKCS, the UK government
commissioned a review of the UK
offshore oil and gas recovery and
regulation led by Sir Ian Wood.
The UKCS Maximising Recovery
Review Final Report was published
in February 2014 (commonly
THE UKCS TECHNICALLY HAS
THE CAPACITY TO SUSTAIN
PRODUCTION FOR AT LEAST
THE NEXT TWO DECADES
18
referred to as the Wood Review).
In July 2014, the government
published its formal response to
the Wood Review and set out its
proposals for implementing the
Wood Review’s recommendations.
From April 2015, the OGA replaced
the Department for Energy and
Climate Change (DECC) as the
entity responsible for petroleum
licensing and regulation of the
upstream oil and gas sector,
including: oil and gas licensing,
oil and gas exploration and
production, oil and gas fields and
wells, oil and gas infrastructure,
and carbon storage licensing.
In March 2016 the strategy for
maximising economic recovery in
the UK came into force. The key
principle of the strategy is that all
stakeholders should be obliged
to maximise the expected net
value of economically recoverable
petroleum from relevant UK
waters, not the volume expected
to be produced. If a relevant party
decides not to ensure maximum
economic recovery, it must allow
others to seek to maximise the
value of economically recoverable
petroleum from its licence or
infrastructure, including by
divesting itself of the licence or
asset ‘to other financially and
technically competent persons.
Where an operator’s returns are
unsatisfactory, or it cannot raise
suitable finance to proceed,
and cannot divest itself of the
asset, MER UK (a forum set up
to maximise economic recovery
from the UKKCS) requires it to
relinquish the related licences after
a reasonable period of time’.
The UK government has also
declared that shale gas has the
potential to contribute to the UK’s
energy security and economy.
However, shale gas drilling in
the UK is still at an exploratory
phase. No commercial operations
have yet been authorised and a
lengthy application process must
be completed before commercial
drilling can start. However, the
recent approval of two planning
decisions in Lancashire and North
Yorkshire suggest that the UK is
getting closer to commercial shale
gas exploitation.
Oil and gas-related activities on
the UKCS are subject to a special
fiscal regime and profits arising
from such activities are subject to
ring-fence corporation tax at a rate
of 30 %. This gave an effective
marginal tax rate of 67.5% for
Petroleum Revenue Tax fields and
50% in other cases.
Investment in the UKCS is
encouraged by tax relief being
provided for expenditure on
research, exploration, appraisal
and production, either through
capital allowances and also, once
production has commenced,
through tax deductions for
expenses incurred wholly and
exclusively for the purposes of
an eligible trade. However, a
ring-fence applies to all fields
(irrespective of when development
consent was obtained) which
prevents profits arising within the
ring-fence from being sheltered
by losses arising from activities
carried on outside the ring-fence.
The majority of expenditure on
exploration and development in
the pre-production phase is eligible
for 100% tax relief in the form of
mineral extraction allowances.
THE RECENT INCREASE IN
ACTIVITY INDICATES THAT
IT IS NOT THE OIL PRICE
LEVEL ITSELF BUT OIL
PRICE STABILITY THAT IS
PARAMOUNT FOR INVESTORS
Expenditure on research and
development, before significant
reserves have been found, is
generally eligible for 100% tax
relief in the form of research and
development allowances. Other
CAPEX is generally eligible for
relief in the form of plant and
machinery allowances.
During the 2017 budget the
government set out measures
to support its objective of
encouraging business investment
to maximise the economic
recovery of the UK’s hydrocarbon
resources. The government will
introduce a transferable tax
history mechanism for UK oil
producers for deals that complete
on or after 1 November 2018.This
will allow companies selling North
Sea oil and gas fields to transfer
some of their tax payment history
to the buyers of those fields. This
will level the playing field between
buyers and sellers of oil and gas
fields, providing new investors
in the UKCS with certainty on
the tax relief available for the
decommissioning costs. This
should encourage new entrants
19
and fresh investment for a basin
that still holds up to 20bn barrels
of oil.
The trend in recent years has been
for the government to reduce the
fiscal burden on licencees, with a
focus on incentivising investment
in the more challenging and
technically demanding fields on the
UKCS.
As of 2018 the OGA is also
introducing new measures
to ensure operators work
appropriately with the supply
chain and derive maximum value
from project activity. Under the
new measures, operators will be
required to develop supply chain
action plans (SCAPs) for all new
projects valued at more than
£25m, including decommissioning
activities.
SCAPs will include details such
as the maturity of projects,
demonstrating stages of
development, expected dates
of construction, delivery of first
hydrocarbons or, in the case
of decommissioning, removal
of first infrastructure. A project
plan including milestones
of key interactions with the
supply chain, e.g. procurement
decisions, engagement events,
strategy endorsements and
award recommendations, is also
expected. If requested, the OGA
will provide practical support
to operators in preparing and
submitting SCAPs, which will be
reviewed based on engagement,
trust, innovation and quality
criteria.
The OGA began to accept SCAP
submissions in January 2018 and
MARKET FOCUS: THE UKCS
expects to see them included in
all field development plans and
decommissioning programmes
from 1 April 2018. The purpose
of SCAPs is to assist operators
in demonstrating their contract
strategies and concepts are
comprehensive and well-positioned
to deliver best value. SCAPs have
been structured for the offshore
environment and the process has
been piloted by Chevron, Premier
Oil and Repsol based on real
projects.
Operator mergers
and acquisitions
After a relatively quiet couple of
years following the oil price crash,
it appears that we may finally be
witnessing the beginnings of a
wave of business activity across
the oil and gas sector. Deal values
and volumes rose dramatically
in 2017 surpassing US$8bn, as
companies announced a number
of agreements. With oil prices
seeming to have stabilised for
the time, there is a sense in the
market that we have turned a
corner, unlocking deals that were
unable to progress beforehand. In
this rapidly evolving landscape we
see a number of emerging themes:
private equity pursuing deals in the
North Sea; larger international oil
companies conserving cash and
looking to divest non-core assets;
a greater willingness on both
sides to explore deal structures to
address buyer and seller needs;
and a desire to explore alliances
to exploit opportunities and
capabilities more cost effectively.
The level of interest in the
North Sea is perhaps surprising
given the maturity of the basin,
the low oil price environment
and the liabilities related to
decommissioning that new
investors may have to take on.
Notable examples of recent
investment activity include Neptune
Oil and Gas’s acquisition of ENGIE’s
exploration and production
assets for US$3.9bn, Chrysaor’s
acquisition of half of Shell’s North
Sea production base for US$3.8bn
and Siccar Point Energy’s
acquisition of OMV Group’s UK
asset portfolio for US$1bn. The
common trend in these acquisitions
is the role of private equity in
funding the transaction. Neptune
Oil and Gas is backed by Carlyle
Group and CVC Capital Partners,
Chrysaor received a US$1bn
injection from EIG Partners and
Siccar point is backed by Bluewater
Energy and Blackstone. In the case
of Chrysaor, EIG investing into the
North Sea represented a move
away from their historic investment
focus which had been largely in
North America with some step-out
to South America and Sub-Saharan
Africa.
During 2017, privately owned
INEOS also made a significant
expansion to its North Sea
business. The first move was
to acquire DONG Energy’s (now
known as Ørste)d entire oil and
gas business. The deal positions
INEOS as a top ten company
in the North Sea, alongside its
existing production interests,
and the largest privately-owned
exploration and production
business in the basin, taking the
title from new player Chrysaor.
The DONG portfolio comprises
a mix of long life production and
20
new field developments fields,
with combined average production
across the North Sea and Atlantic
Margin last year of 100,000boe/d.
The package also includes 570m
barrels of oil equivalent (MMboe) of
commercial and potential oil and
gas reserves in Denmark, Norway
and the UK (West of Shetland).
Later in 2017 INEOS also made
a US$250m deal to acquire the
North Sea Forties pipeline system
and Kinneil terminal from BP.
Aside from private equity there has
also been significant movement of
assets between the majors. Total
agreed a deal worth US$7.45bn
to buy Maersk’s oil and gas
business in a deal which will
raise the French operators North
Sea output to 500,000boe/d
by 2019. The purchase also
signals that some oil majors are
prepared to invest to replenish
reserves and boost production,
as opposed to the higher risk
option of exploration. Majors are
also under increasing pressure
from shareholders to maintain
profitability to ensure dividend flow
to shareholders. Therefore, many
have implemented aggressive
divestment programmes to
dispose of non-core assets to
rationalise their existing portfolio,
streamline business operations
and cut operating costs. Smaller
companies have also been looking
to realign their portfolio; Sterling
Resources agreed the US$163m
sale of its UK operating subsidiary
(Sterling Resources (UK) Ltd.) to
Oranje-Nassau Energie B.V.
There has also been a recent
increase in mergers, particularly
with the smaller independent
companies. Centrica agreed with
 Corporate acquisition
Corporate acquisition
Corporate merger
Asset deal (Bruce, Keith, Rhum)
Corporate merger
Figure 15
Graphic showing recent North Sea mergers and acquisitions and asset transfers
for operators.
Bayerngas Norge to merge the
companies’ North Sea assets,
creating the region’s largest
independent oil and gas producer.
The JV produced 50-55m barrels
in 2017 and has 625m barrels of
proven and probable (2P) oil and
gas reserves.
Corporate acquisition
Corporate acquisition
Corporate acquisition
Asset deal (Wytch Farm)
Asset deal (Magnus, Sullom Voe Terminal)
This recent increase in activity,
particularly private equity,
indicates that it is not the oil price
level itself but oil price stability
that is considered paramount
for investors. The recent price
stabilisation has helped to close
the valuation gap aligning sellers’
21
expectations to buyers’ investment
appetite thereby facilitating
transaction success. Private equity
deals are now being completed
as vendors are willing to reflect
realistic pricing coupled with
innovations in deal structuring.
Tax reforms by the UK government
have further incentivised new
investment in-line with the
Maximise Economic Recovery
agenda following the Wood Review.
In the 2015 and 2016 annual
budgets, the Supplementary
Charge Tax was reduced from
20% to 10%, and the Petroleum
Revenue Tax, which was previously
50%, was scrapped altogether.
Furthermore, looking to the future
during the 2017 budget, the UK
Chancellor of the Exchequer
announced that an expert panel
would examine ways of making it
easier to buy and sell North Sea
oil and gas fields, with the aim of
keeping them in production for
longer.
Contractor mergers
and acquisitions
Since 2014 oil and gas producers
have cut activity and put
pressure on services groups
to reduce prices. Much of the
cost reductions which have been
achieved through the industry have
been through the supply chain.
This increasing pressure has led to
a number of high profile mergers
and acquisitions within the oilfield
services industry.
The first to set off this trend
was Schlumberger, who in April
2016 announced its merger
with Cameron International
MARKET FOCUS: THE UKCS
Corporation. The merger intended
to create technology-driven growth
by integrating Schlumberger’s
reservoir and well technology with
Cameron’s wellhead and surface
equipment, flow control and
processing technology that the
companies believe will result in the
industry’s first complete drilling
and production system.
In May 2016, Technip and FMC
Technologies announced it was to
merge to become TechnipFMC,
with the aim of creating a global
leader that will drive change by
redefining the production and
transformation of oil and gas.
TechnipFMC’s flexible commercial
model is expected to provide both
integrated and discrete solutions
to customers across the value
chain through the provision of a
broader portfolio of solutions.
In December 2016, antitrust
clearance was received from the
Brazilian authorities, following
approval from antitrust authorities
in the EU, the US, India, Turkey,
Mexico and Russia and the deal
was completed in early 2017.
General Electric completed
its buyout of Baker Hughes,
merging it with its own oil and gas
equipment and services operations
to create the world’s second-
largest oilfield service provider
by revenue. The new company
was announced in July 2017 as
Baker Hughes, a GE company.
For Baker Hughes, the deal helps
it grow in size and become an
even-more important player in the
industry after antitrust concerns
scuttled a tie-up last year with
rival Halliburton. For GE, the deal
will help it focus more on the oil
and gas sector while shielding
Corporate acquisition
Corporate merger
Corporate merger
Corporate acquisition
Corporate merger
Figure 16
Graphic showing some of the key
mergers and acquisitions within the
service sector.
the parent company’s earnings
from the energy industry’s boom
and bust cycles. This merger has
also allowed for a new breed of
contract structure with Baker
Hughes, a GE company winning
the first ever fullstream contract
22
at the end of 2017. The contract
for work on the Pasca A field
development, will include drilling
services, subsea equipment,
gas processing topsides, gas
compression and turbomachinery
as well as installation and
commissioning services.
Following delays by the
Competition and Markets Authority
it was confirmed in October 2017
that Wood Group had completed
it £2.2bn takeover of Amec
Foster Wheeler to become Wood.
Following the takeover, Wood’s
exposure to oil and gas as a whole
will reduce to 50-55% of revenues.
A bit more than half of that is
still upstream but the remainder
will be spread across the rest of
the oil and gas market, such as
downstream petrochemicals and
refining activities. As a part of the
condition of receiving competition
approval in the UK, Wood was
required to sell Amec’s North Sea
upstream oil and gas business to
WorleyParsons for US$303m.
Early in 2018 Subsea 7 signed
a deal to acquire a 60% holding
in Xodus Group. This JV aims
to expand Subsea 7’s early
engineering engagement in both oil
and gas and offshore renewables.
It is understood that Xodus will
continue as an independent
company. The move also gives
Subsea 7 exposure to capabilities
within decommissioning which is
something that Xodus has been
expanding on in recent years.
Exploration
While a relatively high number of
project sanctions are expected in
the near future, the longer-term
outlook for production is less clear,
and exploration success is seen as
crucial to limit the output declines
expected to accelerate into the
next decade. UKCS production has
increased year-on-year since 2013
and analysts expect this to peak in
2018, probably near 1.9MMboe/d
unless there is significant
exploration success.
Although exploration and appraisal
drilling is at an all-time low,
volumes discovered in both 2016
and 2017 are higher than in any
year since 2008. This is a positive
sign for the basin, especially since
the majority of volumes discovered
in 2017 have been in areas
considered frontier and under-
explored. This indicates that there
are still large discoveries to be
had in a basin where recent focus
has largely been on near-field
exploration and the development
of small pools. The OGA’s current
estimate for yet-to-find potential
is between 1.9Bboe and 9.2Bboe,
with a central estimate of 6Bboe.
The number of exploration wells
drilled in 2017 was low and in-line
with the four-year average, with
14 spuds over the first three
OIL VOLUMES DISCOVERED
IN BOTH 2016 AND 2017
ARE HIGHER THAN IN
ANY YEAR SINCE 2008
Figure 17
Six of the most anticipated wells of
2018.
Source: Wood Makenzie Petroview.
quarters of the year and just
one more drilled over the fourth
quarter (Figure 18). At least two
of the wells drilled were confirmed
as commercial discoveries with
combined recoverable volumes
estimated to be over 300MMboe.
The Statoil-operated Verbier well
was initially announced as dry, but
after side-tracking to target an
up-dip location, technical reserves
with current estimates of between
25–130MMboe were discovered
requiring further appraisal.
Another success was at the
Halifax well, which was exploring
basement plays in Hurricane’s
West of Shetland acreage
analogous to their nearby
Lancaster field. Hurricane
encountered technical reserves
currently estimated at 250MMboe,
making it one of the UK’s biggest
discoveries in the last decade.
23
Early in 2018 BP announced a
further two discoveries which
were drilled during their 2017
summer drilling campaign. One
discovery was made in Block
29/4e in the Central North Sea,
named Capercaillie, and another
in Block 206/9b West of Shetland,
branded Achmelvich. The size of
the resource was not disclosed for
either discovery.
Just eight appraisal wells were
drilled during 2017. One reason
for this low well count is the
similarly low levels of recent
exploration success, meaning
few new opportunities have
arisen for companies to pursue
and appraise. However, Apache
has successfully appraised
their Callater discovery and one
well is still active: Wintershall’s
Winchelsea discovery, which is
likely to be tied-back to its Wingate
field if results are positive.
The number of development wells
drilled during 2017 is also an area
of concern for the future of the
UKCS. Only around 80 wells were
spud over the whole year. This
represents the second consecutive
year of record low development
drilling. Although this may be
partly attributable to more efficient
drilling and recent development
concepts requiring fewer wells
to maintain production, there
are concerns about the potential
impact on production from existing
platforms. Over the last 40 years,
the number of development wells
spudded has strongly correlated
with total production from the
basin, indicating that a decline
in development drilling could be
quickly followed by a decline in
production.
MARKET FOCUS: THE UKCS
50
45
40
Number of exploration wells
35
30
25
20
15
10
5
0 0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Figure 18
Exploration activity since 2005 and the reserves discovered.
Source: data taken from Oil & Gas UK.
In 2018, 15 exploration wells are
forecasted to be drilled in UK
waters, similar to 2017. There
should be at least five wells in the
West of Shetland area, the highest
in the region since 2014 (Figure 3).
Overall, Apache is set to be the
most prolific driller with up to five
operated wells. It is also a partner
with Azinor Catalyst on the Agar/
Plantain well, close to Apache’s
Beryl complex, and targeting
60MMboe of recoverable reserves.
Siccar Point Energy plans to drill
the 1.4Tcf Lyon prospect and final
appraisal of the Cambo discovery,
both West of Shetland. In the
same area, Nexen will appraise
the Cragganmore discovery, and
revisit Glengorm, a high-pressure/
high-temperature prospect in the
UK Central North Sea.
In an attempt to encourage
exploration in the UKCS the OGA
Exploration wells
Potential upside on forecast
Volumes discovered
has set up the 21st Century
Exploration Roadmap Technical
Advisory Committee which aims
to provide an up-to-date, readily
accessible, digital perspective on
the prospectivity and geology of
the UKCS. The committee aims
to conduct regional subsurface
MORE THAN 90 APPLICATIONS
WERE RECEIVED DURING THE
30TH OFFSHORE LICENSING
ROUND, SUGGESTING
THAT CONFIDENCE IS
RETURNING TO THE BASIN
24
600
500
Reserves discovered (MMboe)
400
300
200
100
studies to support exploration,
both in mature and frontier areas.
These studies will help to de-
risk plays and improve success
rates across the basin. The work
complements the release of
government seismic data, which
includes both newly acquired
seismic lines and reprocessed
seismic in frontier and mature
areas.
New licensing flexibility is also
intended to stimulate exploration
drilling in the basin. The 29th
Offshore Licensing Round tied-
in with the release of the 2015
government seismic data,
including lines shot in frontier
areas such as the Rockall Trough,
and was the first time the Innovate
Licence was rolled out. This new
licence offers far more flexibility of
terms for applicants and allows for
more pragmatic work programmes
to be designed by licencees. The
round resulted in 25 licences
being awarded for 111 blocks, with
three firm well commitments – an
encouraging sign for exploration in
the basin.
The UK’s 30th Offshore
Licensing Round which was
launched in July 2017, offered
opportunities to acquire licences
in areas containing undeveloped
discoveries. The round saw
more data released by the
OGA to help support industry’s
efforts. After closing on 22
November, early signs from the
round are positive. More than 90
applications were received for
over 200 blocks, suggesting that
confidence is returning to the
basin. Results will be announced
in the second quarter of 2018,
which will hopefully lead to many
new licences being awarded and
commitment from industry for a
firm programme of wells.
Preparation for the 31st Offshore
Licensing Round, due to open in
mid-2018, has already begun.
The OGA has wholly-funded new,
openly available, seismic and
well data packages for the East
Shetland Platform and South West
Britain areas. The OGA is also
releasing a number of geological
reports as part of the 21st Century
Exploration Roadmap aimed at
investigating key subsurface
uncertainties in these areas.
Offshore developments
Around 39 new fields were
brought onstream between 2010
and 2014, while over the same
period 2.6Bboe were sanctioned
Under development
Pre-FID
Onstream
2018: Mariner, 2019: Culzean, Lancaster
Clair Ridge early production system
2
2020: Buzzard
Million barrels of oil equivalent per day phase 2
1.5
1
0.5 Onstream fields in decline.
Infill drilling forecast remains low
0
2017 2018 2019 2020
Figure 19
UK production forecast 2017–20.
Source: data taken from Oil & Gas UK.
for development. However, these compared with only four over
increases in production and the the past two years (Figure 14).
start-up of several large projects Penguins was the first field in 2018
mask an overall reduction in to take an FID which is the first
investment in new projects. The manned installation for Shell in
UK has experienced a year-on-year the Northern North Sea in almost
decline in new projects approved 30 years. Shell confirmed that
for development. During 2017 Fluor has won the EPC contract to
only two field developments provide the circular FPSO vessel.
were sanctioned (down from 20 It is understood that Fluor will
in 2012): Statoil’s Norwegian-UK sub-contract fabrication work to
cross-border Utgard scheme and China’s Offshore Oil Engineering
Hurricane Energy’s Lancaster early Company.
production system, which is set to
develop about 37MMboe. Shell’s last operated FID in
the North Sea was on the
The UK sector is set for a Fram project in 2012 but this
resurgence of field investments was put on hold a year later
during 2018 with as many as 13 after unexpected results from
projects likely to be sanctioned, development drilling. However,
25
MARKET FOCUS: THE UKCS
following a new development
plan which proposes a subsea
solution to be tied-back to the
Shearwater platform. Shell now
intends to drill two development
wells - one new hole and a re-
entry of an existing one. While no
modifications will be required to
Shearwater’s processing topsides,
the platform’s chemical injection
and control systems will need to
be modified to handle Fram output.
Shell aims to start drilling work in
the fourth quarter of 2019, lasting
until the first quarter of 2020. First
oil is targeted for Q2 2020, after
the topsides work is completed.
The West of Shetland region is one
of the major growth regions for
the UKCS. The region is forecast
to see an increase in production
from 120,000boe/d in 2016 to
around 350,000boe/d by 2020
and is expected to account for
25% to 30% of total production
from the UKCS by the early 2020s,
compared with just 7% in 2016.
BP’s Clair Ridge will be the next of
these projects to add significant
production to the region. The near
US$7bn project will be the last of
the pre-oil crash projects to come
online in the North Sea, with first
oil expected mid-2018. BP is now
carrying out an appraisal drilling
programme on the Clair field to
assess the potential for a third
phase of development (Grater
Clair). The project could include a
sizeable new central processing
facility with a capacity of 60,000
to 100,000bbl/d.
BP has held significant exploration
acreage within the West Shetland
region for a number of years
and announced a significant oil
discovery within the acreage in
February 2018. The Achmelvich
oil discovery is located close to
the Clair field in Block 206/9b,
with reserve volumes yet to be
announced. BP also co-announced
the Capercaillie discovery, located
in Block 29/4e in the Central North
Sea which encountered light oil
and condensate in Paleocene and
Cretaceous-age reservoirs.
One of the largest un-developed
discoveries in the North Sea,
located 80 miles north-west of
Shetland, is Chevron’s Rosebank
project. The 300MMbbl oil
discovery is to be developed
through 14 wells tied to a turret
moored FPSO, which will be able
to produce 100,000bbl/d and
190MMcf/d of associated gas.
Daewoo Shipbuilding & Marine
Engineering, Hyundai Heavy
Industries, Samsung Heavy
Industries and Sembcorp Marine
are all bidding for the FPSO build
with bids to be submitted by March
2018. The schedule then calls for
Chevron to evaluate the proposals
ahead of a likely FID in late 2018
or early 2019.
THE UK SECTOR IS SET
FOR A RESURGENCE OF
FIELD INVESTMENTS
DURING 2018 WITH AS
MANY AS 13 PROJECTS
LIKELY TO BE SANCTIONED
26
Hurricane Energy also has
significant reserves West of
Shetland. In September the
operator took an FID on the
Lancaster early production system
with a development plan that
proposes the drilling of two wells
tied-back to the Aoka Mizu FPSO
vessel. First oil for the development
is aimed for the first half of 2019.
TechnipFMC will provide the SURF
package and Bluewater Energy
has been contracted to retrofit the
Aoki Mizu FPSO for the project.
Hurricane also had a successful
exploration campaign during
2017. The Halifax prospect was
successfully drilled and analysis of
the oil water column data indicates
that the Halifax discovery is linked
to the Lancaster discovery which
opens up the option for a joint
development plan for the two
accumulations.
The proposal for Nexen’s Buzzard
phase II is the drilling of up to eight
production wells and four water
injection wells. The wells will be
tied-back to the existing Buzzard
production platform by a series
of subsea pipelines and control
and chemical injection umbilicals.
In early 2018 Maersk Drilling
confirmed that it will carry out
development drilling work for the
project. The deal to commence
development drilling on the second
phase of Buzzard would indicate
Nexen is set to make an FID on the
project early this year.
Having been seen as a largely
uneconomical development option
following the crash in the oil price
seems that certain enhanced oil
recovery (EOR) techniques are
still economical in the North Sea.
The OGA has tried to encourage
 90
Rosebank
80 Pilot

70
US$/bbl breakeven

60 Cheviot Eagle   

50
Breagh
phase 2
40
Tolmount Clair
30 Fram phase 3

20 Bubble size = reserves

100
10 Buzzard MMboe
phase II
0
2018 2019 2020 2021
Planned FID date

Figure 20

Key pre-FID UKCS developments and their reserve sizes.

Source: EICDataStream.

the practise by publishing
documents such as Polymer
Enhanced Oil Recovery – Industry
Lessons Learned, which aims to
share lessons to help industry
understand the potential benefits
and complexities of implementing
the technology.
In taking an FID at the end of 2017
on the first phase of the Captain
EOR project, Chevron is the first
operator to sanction such a project
since the oil crash. Stage one of
the EOR project, which follows
several pilot programmes, will
feature an expansion within an area
of the field close to the existing
Captain platform and include the
drilling of up to six long-reach
horizontal injection wells. The Steam
Production Company is also looking
to implement EOR techniques at
the Pilot Main, Pilot South and
Harbour fields in the Central North
Sea. The fields may implement a
steam flooding technique which
would be a basin first if the project
were to go ahead. The Steam Oil
Production Company has entered
into a cooperation agreement
with FluidOil, the independent
international heavy oil technology
company, to explore the potential
of integrating FluidOil’s Viscositor
Heavy-to-Light oil upgrading
technology into the project. It is
understood that Steam Oil now
plans to construct a steam flood
test project on part of the Pilot field.
Southern North Sea
Tight-gas reservoirs within the
North Sea Basin contain an
estimated 3.8Tcf of natural
gas, according to the OGA.
Exploration in the legacy region
remains attractive as successful
discoveries can be developed via
existing platforms. Technological
advances including a combination
of horizontal drilling and reservoir
stimulation also have enabled
operators to exploit tight gas
reservoirs, many of which were
considered non-commercial at the
time of discovery.
The Southern North Sea Basin
has produced 40Tcf of gas since
1967. The basin produces about
1.3bn cubic feet per day using
associated infrastructure, offshore
compression hubs, export
pipelines and onshore terminals.
Oil & Gas UK commissioned a
joint industry project in 2015 to

27
MARKET FOCUS: THE UKCS
better understand the Southern
North Sea’s remaining potential.
The volume of tight gas remaining
within or near historic producing
fields was a key finding of the
study. According to the OGA,
60% of undeveloped Southern
North Sea discoveries and 50%
of known prospects on the
UKCS are classified as tight-gas
accumulations. Based on current
gas price projections, the OGA
expects drilling activity to increase
in the short to medium-term,
including development, exploration
and appraisal wells.
In 2017, BP and Perenco tried and
failed to explore a Carboniferous
prospect within Block 43/26a of
the Southern North Sea. It had
hoped that if successful this would
open further opportunity within a
Carboniferous play. However, the
Ravenspurn well turned out dry
and was plugged and abandoned
accordingly. It is understood that
the partners are still interested in
the play and will look to drill more
exploration wells on the play.
Premier Oil’s Tolmount is well
placed to be the next project
sanctioned in the Southern
North Sea, with an FID likely to
be reached in mid-2018. The
platform will be awarded as an
EPCI. There are three companies
competing to build the platform,
which are Heerema Fabrication
Group, Kvaerner and Rosetti, with
the three competing companies
expected to be reduced to two.
It is understood that the contract
for the pipeline will awarded as an
EPCI and will likely be awarded to
a European contractor. In addition
to these contracts it is understood
that Costain is bidding for the
TIGHT-GAS RESERVOIRS
WITHIN THE NORTH SEA BASIN
CONTAIN AN ESTIMATED
3.8TCF OF NATURAL GAS
EPC relating to the onshore work,
following on from its work carried
out at the FEED stage.
In October 2016, Independent
Oil & Gas (IOG) completed its
purchase from Verus Petroleum
of the Vulcan satellites, including
three fields in Block 49/21a, Block
49/21d, Block 48/25b and Block
49/21c in the Southern North
Sea. The fields lie in Permian age
Rotliegendes Leman sandstone
with reservoir seal provided by the
overlying Zechstein evaporates
and carbonates. Vulcan East was
discovered in 2006 adjacent to the
producing Vulcan field operated
by ConocoPhillips. Vulcan North
West was discovered in 1987, and
Vulcan South in 2000. IOG owns
100% of the satellites and has
announced it will submit a field
development plan by year-end
2017, make an FID early 2018 and
produce first gas in mid-2019.
Decommissioning
The UKCS currently has the largest
decommissioning market in the
North Sea, with around £1.8bn
invested in 2017 and is expected
to grow to over £2bn in 2018.
28
This is equal to around 11% of
total UKCS expenditure and could
increase further to around 17% by
2025 as more fields enter their
decommissioning phase and spend
in other areas reduces.
There are currently around
1,346 operational offshore
installations in the North Sea,
over half of which are subsea
steel infrastructure. Estimates of
scope, complexity and cost vary
but for the UKCS there are over
250 fixed installations, over 250
subsea production systems, over
3,000 pipelines and approximately
3,650 wells, all of which must be
decommissioned.
The UKCS has an ageing asset
base with an average age of
26 years, more than any other
North Sea country. Most of the
installations are in the Southern
North Sea, where water depths are
generally less than 60 metres and
the infrastructure are mostly light
steel fixed platforms. Further north
in deeper waters, the platforms
are generally larger and heavier.
Decommissioning does not
represent a new industry but is
part of the natural life cycle of an
installation, relying on many of
the same people and skills that
have already been developed
through oil and gas exploration
and production. It encompasses
a broad range of activities
from well P&A, to cleaning and
flushing of facilities and pipelines,
offshore removals and onshore
disposal. With almost half of the
estimated expenditure on the
UKCS up to 2025 to be spent
on well P&A, and a further 16%
to be spent on the preparatory
work for decommissioning and
running facilities after they
cease production, much of the
employment will be in these areas.
To date, around 10% cent of
oil and gas platforms installed
across the North Sea have been
decommissioned and less than
5% of pipelines, highlighting the
infancy of the decommissioning
market. Over half of the
decommissioned facilities were in
the UKCS, with 27 fixed steel and
26 floating steel platforms being
removed. Although the majority of
the platforms are in the Southern
North Sea, only 36% of previous
UKCS decommissioning has
occurred in this region.
The OGA is eager to keep
decommissioning costs as low
as possible. This is because oil
companies with a strong tax history
can claim up to a maximum 75%
tax refund on the decommissioning
expenditure. With the recent
legislation change allowing for a
transferable tax history this also
means that operators acquiring
assets are eligible for full tax
rebate on decommissioning. As
INVESTMENT IN NORTH
SEA DECOMMISSIONING
IS EXPECTED TO BE £2BN
IN 2018 - 11% OF TOTAL
UKCS EXPENDITURE
such, a significant portion of the
estimated expenditure will be paid
for by the UK government. The
OGA is aiming to reduce overall
cost by at least 35% below the
mid-point estimate. To achieve
this goal, the OGA has designed
a decommissioning strategy with
three main priorities, including:
1. Cost certainty and reduction.
Driving targeted cost efficiency
programmes including
innovative and regional
approaches with extensive and
effective knowledge sharing
and best practice adoption.
2. Decommissioning delivery
capability. Developing an
efficient and exportable
low-cost and profitable
decommissioning delivery
capability supported by a
competent and efficient supply
chain, a selection of business
execution models, all designed
to appropriately allocate risks,
align industry participants
and drive down costs.
3. Decommissioning scope,
guidance and stakeholder
support. Working with the
Department for Business,
Energy & Industrial Strategy
(BEIS) and other relevant
parties to identify and evaluate
opportunities to further
optimise and define parameters
for decommissioning scope and
improve industry engagement
with the regulators.
UK shale
Natural gas produced from
shale is often referred to as
29
‘unconventional’ and this refers
to the type of rock type in which
it is found. ‘Conventional’ oil
and gas refers to hydrocarbons
which are located in sandstone or
limestone, instead of tight sands,
shale or coal which are the focus
of unconventional exploration.
However, the techniques used
to extract hydrocarbons are
essentially the same. What has
changed are advancements in
technology over the last decade
which have made shale gas
development economically viable.
Shale gas drilling in the UK is
still at an exploratory phase – no
commercial operations have yet
been authorised and a lengthy
application process must be
completed before commercial
drilling could start. However, the
recent approval of two planning
decisions in Lancashire and North
Yorkshire suggest that the UK is
getting closer to commercial shale
gas exploitation.
The UK’s key sites
IGas
IGas has two areas of
exploration, Springs Road
and Tinker Lane, in North
Nottinghamshire which it is
looking to push ahead with.
Having acquired approval to drill
(not to frack) a well on each area
the operator is commencing
with site construction at the
two sites. IGas plans to drill the
Springs Road well first with a
spud date aimed for mid-2018.
The company has not yet applied
for permission to frack either
well, previously saying it will do
so only if coring and reservoir
characteristics are supportive
MARKET FOCUS: THE UKCS

of its existing geological model.

Spring Road is being developed
in partnership with Total, and
the Tinker Lane site is being
developed in partnership with
INEOS.

Cuadrilla
In late 2016, the UK government
made a contentious decision
to overrule Lancashire County
Council’s decision not to allow
Cuadrilla fracking rights to the
Preston New Road site. Since then
the operator has successfully
drilled a vertical well on the
site and is now in the process
of drilling two horizontal wells.
Cuadrilla Resources has received
approval for planning permission
to carry out flow tests which will
indicate the prospectivity of the Figure 21
area. The company also gained
Potential UK shale gas reserves.
West Sussex County Council’s
Source: Indicative Energy Technology Assessment of UK Shale Gas Extraction.
approval to explore the Balcombe Geoffrey Hammond (2016).
site.

Third Energy
Third Energy was the first
company to receive approval
from the government to frack an
onshore well since the ban was
put into place in 2012. The Kirby
Misperton site has since acquired
the relevant approval from the
Environment Agency. The final
INEOS IS THE LARGEST
ACREAGE HOLDER OF UK
SHALE GAS LICENCES
step in the process to fracking
the site is for BEIS to check
that all conditions in Section 50
of the Infrastructure Act 2015
(regarding onshore hydraulic
fracturing safeguards) have been
fulfilled and that the Secretary of
State is content for the OGA to
issue consent. Once completed,
the OGA will issue consent to
complete and test the well and
thereafter provide formal consent
to conduct the hydraulic fracturing
operation.
INEOS
Having first acquired acreage in
2014, INEOS is now the largest
acreage holder of UK shale gas
licences with interests across
North and South Yorkshire, the
East Midlands, Cheshire and
Stirlingshire. The South Yorkshire
site is the most advanced with
the company now looking to drill
three wells. Core samples will be
taken from the exploration well to
test the reservoir properties and
understand the pressure in the
target zone.
The operator’s Scottish acreage
was dealt a setback when in
2017 the Scottish government
announced a country wide ban.
INEOS is now looking to appeal
the decision in the country and
believes that there were very
serious errors within the decision-
making process, including a failure
to adhere to proper statutory
process.

30
Prospectivity/resource
estimates
The UK shale gas industry is in its
infancy, and ahead of production
testing there are no reliable
indicators of potential productivity
of its most prospective Jurassic,
Carboniferous and Cambrian
shale gas plays. For that reason,
resource estimates can only be
made by analogy with producing
shale gas plays in America,
although again ahead of drilling,
hydraulic fracturing and flow
testing these analogies may
ultimately prove to be invalid.
The British Geological Survey
(BGS) has estimated the possible
reserves of shale gas in the
Bowland-Hodder study area or
play (encompassing national parks
and major cities) and the Weald
in the south-east for DECC have
also collated several estimates
of UK shale gas potential that are
presented in Table 1. The great
uncertainties inherent in such
provisional estimates (total UK
technically recoverable shale gas
reserves of 5.3–40Tcf) can only be
refined by extensive investigative
drilling, possibly requiring
hundreds of wells.
In 2011, Cuadrilla estimated a
total resource of 210Tcf in their
licenced portion of the Bowland
play, a layer of shale located
under northern England that is
considered to have the UK’s best
shale gas potential. Assuming
a North American recovery
factor of around 8-20% would
indicate potentially recoverable
resources of 18-40Tcf. The
thickness and gas content
used for the estimates were
informed by data from three
wells drilled by Cuadrilla in 2011
along with three wells drilled in
the 1980s. Estimates of shale
thickness were also supported
by subsurface imaging, however,
the accuracy of both recovery
factors and extrapolating gas
content across the Bowland
shale based on well information
remains uncertain.
In spite of the differences
between these estimates, they
suggest that UK resources are
likely to be significant compared
to those elsewhere in Europe
given the moratorium on shale
gas fracking in France and the
limits on extraction in Poland,
due to geological constraints.
However, making assumptions
about recovery rates (based on
experience at over 80,000 US
horizontal shale gas fracking
sites) and the proportion of
EIA
Bowland shale Gas in place 95
Technically 19
recoverable
Weald Basin Gas in place 2.1
(Liassic shale)
Technically 1 –
recoverable
Total UK Gas in place 97
Technically 20
recoverable
Table 1
UK shale resources estimates (Tcf).
31
available resources extractable
in the UK, the BGS suggests
that recoverable shale gas
resources might be equivalent
to some 25–50 years of current
UK natural gas demand. That
would significantly contribute
to Britain’s energy security and
independence. However, making
full use of this resource may not
adhere to UK carbon budgets
and could risk missing its legally-
binding 2050 greenhouse gas
emissions reduction target.
Regulatory regime
Before carrying out fracking,
operators must obtain a number
of permissions, including: a
Petroleum Exploration and
Development licence (PEDL);
planning permission; access rights
from landowners; environmental
permits (including for mining
waste), from the relevant
BGS/ Cuadrilla ECC
DECC
– 200 –
3–7 32–42 2–4
– – –
– –
– – –
5 – 40
MARKET FOCUS: THE UKCS
environmental regulator, health
and safety regulations and permits
from the Health and Safety
Executive (HSENI in Northern
Ireland) and consent from BEIS to
drill and frack.
Shale gas drilling is covered
by the normal UK regime for
all oil and gas exploration
and development. A UK PEDL
allows a company to pursue a
range of activities, including
exploration and development of
unconventional gas, subject to
necessary drilling/development
consents and planning
permission. The Petroleum Act
1998 vests all rights to the
nation’s petroleum resources
in the Crown, but the relevant
government may grant PEDLs
that confer exclusive rights to
‘search and bore for and get’
petroleum. Each PEDL confers
such rights over a limited area
and for a limited period. The
OGA has published guidance
outlining the onshore licensing
system. PEDLs are granted
in licencing rounds where the
OGA calls for applications from
interested parties to submit
bids for advertised licence
blocks. The last round – the 14th
Onshore Oil and Gas Licensing
32
Round – closed in October 2015
and resulted in the award of 159
blocks.
DECC advised in 2013 that there
is no firm licencing distinction
between exploration for shale gas
and exploration for conventional
oil and gas. Some companies who
are drilling mainly for conventional
oil and gas have decided to drill
deeper than they otherwise might
have, in order to see whether
there is prospective shale in their
licensed areas.
PEDLs allow a company exclusivity
in an area to search for, bore

RECOVERABLE SHALE
GAS RESOURCES MIGHT
BE EQUIVALENT TO SOME
25 – 50 YEARS OF CURRENT
UK NATURAL GAS DEMAND
for and get hydrocarbons. Other
permissions beyond the PEDL are
also required before fracking can
take place. The UK has, alongside
Norway, one of the most stringent
onshore drilling safety regimes in
the world.
DECC published regulatory
roadmaps for onshore oil and gas
exploration in each nation of the
UK, which set out the process to
be followed within each legislative
and regulatory framework. These
include: planning permission;
access rights from landowners,
environmental permits (including
for mining waste) from the relevant
environmental regulator, health
and safety regulations and permits
from the Health and Safety
Executive (HSENI in Northern
Ireland) and consent from BEIS to
drill and frack.
The terms of the PEDLs require
approval from BEIS for the choice
of operator. One of the issues
checked before approving an
operator is coverage of relevant
insurances. All drilling operations
are subject to notification from
the Health and Safety Executive.
Each site is assessed by the
relevant environmental regulator,
which regulates discharges to
the environment, issues water
abstraction licences and is a
statutory consultee in the planning
process.
In England and Wales, proposals
for shale gas exploration or
extraction are subject to the
requirements of the Town and
Country Planning Act 1990
administered by the Minerals
Planning Authority (MPA) for the
area in which the development
is located. BEIS consent for all
drilling or production operations
for oil and gas is given only once
planning permission has been
obtained.
In England, the MPA will take the
decision in accordance with the
policies set out in the National
Planning Policy Framework and
the minerals section of the
Planning Practice Guidance. The
Department for Communities and
Local Government has published
planning guidance that clarifies
the interaction of the planning
process with the environmental
and safety consenting regimes.
The procedure used to determine
these applications is set out in
the Town and Country Planning
Act 1990 and the Town and
Country Planning (Development
Management Procedure)
(England) Order 2015 (SI
2010/595). Under these rules
planning applications must be
publicised by site display and in
local newspapers. Information
about the application must also
be available on the relevant
local authority website. This
must include a section on how
interested people can submit
33
representations about the
application, giving a period of at
least 14 days.
The Infrastructure Act 2015 is a
recent legislation change which
includes provisions to streamline
the underground access regime,
including horizontal or lateral
drilling, and make it easier for
companies to drill for shale gas.
On 16 December 2015 regulations
were approved by the House that
provide some protection against
fracking at depths shallower than
1,200 metres in protected areas.
Following a consultation, the
government announced in June
2016 that further protections
would be introduced through the
licensing process.
Environmental concerns
Shale gas production in the US
has been controversial because
of reports of environmental
problems, particularly
contamination of drinking water.
However, the evidence seems to
show that where the problems
are genuinely attributable to shale
gas operations, the problem
is with poor well design and
construction, rather than anything
distinctive to shale gas. In the
UK, well design and construction
is addressed by the Health and
Safety Executive through specific
regulatory controls, which among
other things require verification of
the well design by an independent
third party.
Water use and disposal of
recovered fluids are also of
concern. Re-fracturing might be
expected to be repeated every
four to five years in successful
MARKET FOCUS: THE UKCS
wells. About a third of the water is
returned to the surface. It might
be possible to reuse produced
water by a recycling process or to
reduce the potential environmental
impact by changing the chemicals
added, but at the moment
freshwater is needed for the
fracturing.
Every shale gas drilling application
must go through the local planning
application process and before any
drilling occurs proposals must also
be scrutinised by the Environment
Agency or Scottish Environment
Protection Agency in Scotland to
make sure there is no risk to the
environment and in particular to
water sources by the Health and
Safety Executive for safety and
DECC to ensure best use is made
of the resources. As part of this
process, operators are required
to disclose the content of fracking
fluids to the Environment Agency.
The Health and Safety Executive
then monitors progress on the well
to determine if the well operator
is conducting its operations as
planned. The Health and Safety
Executive is also notified of any
unplanned events and if it is
IF HIGHER PRICES
REMAIN AND EFFICIENCY
IMPROVEMENTS ARE
MAINTAINED, MANY UKCS
E&P COMPANIES MAY SEE A
RISE IN OPERATING PROFITS
deemed necessary, inspections
may be undertaken to inspect
specific well operations on site.
Summary
The immediate response to the oil
price crash was short-term cost
cutting and not just in the North
Sea. Much of this cost reduction
has been done by transferring
pressure to the supply chain in
the form of rate cuts and contract
re-negotiations. As a result, many
suppliers have seen their profit
34
margins collapse, with a number
of large suppliers experiencing
negative margins. However,
genuine industry transformation
can only be achieved through
cooperation and a cultural change
in the shape of collaborative
working between operators,
major contractors and small to
medium sized enterprises. Unions,
governments, regulators and trade
associations also play a part.
Companies providing goods and
services to support oil and gas
production in the UK may begin
to stabilise this year, having
seen revenues fall by over 30%
since peaking at over £16bn in
2014. However, the range of
performance both across and
within different parts of the
supply chain is varied. Many UK
businesses are becoming more
reliant on overseas markets to
secure orders for goods and
services to offset the shortfall
of work available on the UKCS
in the current downturn. Around
40% of turnover generated by
UK oilfield services companies
comes from overseas markets.
Those companies with specialist
products and services that can
be exported are seeing lower UK
demand partly compensated by
international markets. Although
overall exports have been
affected, certain markets, such
as the Middle East, have been
less affected, while others, such
as North America, have been hit
harder.

Oil and gas prices remained

suppressed through much of 2017,
driven primarily by the unexpected
resilience of US shale production.
Prices did, however, begin to pick
up towards the end of last year,
following the OPEC agreement to
cut supply by 1.2MMbbl/d, and
have sustained into the early part
of this year. If these relatively
higher prices remain and recent
efficiency improvements across
the UK sector are maintained,
many exploration and production
companies on the UKCS may see a
rise in operating profits.

Operators have also indicated that

this free cash-flow generated is
expected to be reinvested in new
projects in 2018 as companies
focus on investment instead
on rebalancing their finances.
Reinvestment in new developments
may increase over the next two
years if long-term confidence in
the oil price continues to improve.
However, as companies prioritise
their portfolios the future will
likely see a number of mergers,
acquisitions and asset transfers.
Recent deals offer the opportunity
for new owners to invest in and
grow assets, signalling a strong
vote of confidence in the UKCS.
The forecast of up to 13 FIDs
on the UKCS for 2018 is further
reason for optimism in the future.

35
About the EIC

Established in 1943, the EIC is the leading trade association for

companies working in the global energy industries. Our member
companies, who supply goods and services across the oil and gas,
power, nuclear and renewable sectors, have the experience and
expertise that operators and contractors require.

As a not-for-profit organisation with offices in key international

locations, the EIC’s role is to help members maximise commercial
opportunities worldwide.

We do this in a variety of ways from providing detailed market data

and intelligence; to showcasing specialist skills and connecting
suppliers with buyers; through to running tailored training courses
and events that inform and engage the industry.

The services we offer play an important part in supporting over 600

member companies to do business in a competitive marketplace.

EICDataStream

Our projects database, EICDataStream, provides extensive

information on almost 7,500 global active and future projects
in all energy sectors worth US$10tn. By tracking the full project
lifecycle from feasibility to construction and then completion, it
helps members to identify opportunities and plan their business
development strategies.

EICAssetMap

The only operations and maintenance database to map all major UK

energy assets across all sectors, EICAssetMap puts the details of
over 2,000 facilities at your fingertips. Fully interactive, it allows you
to search by location, sector and operator, as well as find out who
you need to do business with at each site.

Energy Industries Council (EIC)

89 Albert Embankment
London SE1 7TP
United Kingdom

Tel: +44 (0)20 7091 8600

Email: info@the-eic.com
Web: www.the-eic.com
l @TheEICEnergy
i EIC (Energy Industries Council)