Outlook for the UKCS in 2005

Asset Trading

Asset trading, with the purchase and sale of UKCS oil and gas fields has strengthened. Since 2000, an average 1.2 billion boe have been traded each year in the UKCS, the buyers being both existing players and new entrants. The 1.4 billion boe traded in 2004 represent a more than doubling of traded assets in 2003, the most notable trade being the purchase of Encana’s entire North Sea portfolio by Canadian company Nexen.

Figure 37: UKCS Assets Traded

There has been a substantial turnover of assets from super majors through to a new generation of operators over the last decade. In 1993 the top 40 assets comprised over 80% of production, but account for around 25% of production in 2004. Half of these top 40 assets have been sold and many more have changed hands through company mergers and acquisitions; and the process continues in 2005.

Since 1999, 34 new companies from around the world have been attracted to invest and produce in the UKCS, in many cases acquiring some of these older assets. Figure 38 shows that after a lull in interest in 2002, activity again picked up with 8 new producers entering the basin in both 2003 and 2004. These new entrants have been drawn to the UKCS recognising that there are still material opportunities to be found for them. Many companies benefit from the ‘promote’ licenses which offer a reduced work commitment in return for a shorter retention period. The effect of high oil prices on the economic viability of projects in the UKCS must also be noted.

Figure 38: New Entrants to the UKCS 1999 – 2004

In just 6 years, these new entrants have grown to account for 10% of total production and 26% of total capital expenditure in the basin.

Figure 39: Growth of New Entrants 1999 – 2004