A “disappointing” lack of wells are being drilled to stop the decline of production in the UK North Sea, according to a new NSTA report.
The North Sea Transition Authority (NSTA) said just 48 development wells and 12 exploration targets were drilled in 2022.
That fails to meet the NSTA baseline ambition of 60 development wells per year to slow the decline in production and “securing a greater proportion of domestically-produced hydrocarbons”.
That development well target is also on course to be missed in the years ahead.
The decline will continue in 2024 (53 wells planned) and 2025 (36 planned). That compares to 62 wells in 2021, and 73 in 2020.
Meanwhile well interventions have similarly dropped, according to the NSTA wells insight report.
The NSTA said the decline in activity means a situation “is threatened in which operators delay investment which leads to declining production, in turn pushing CoP (cessation of production) closer”.
North Sea windfall tax
Though not named directly in the NSTA report, it comes as operators grapple with the UK windfall tax, imposed last year, which has seen 90% of operators cut spending, according to Offshore Energies UK (OEUK).
On the decline, the report does say: “This may also be due to the limited capital available for E&A and production activity in the UKCS.
“This is hindering efforts to get exploration wells drilled with small companies finding it tougher to get funding lined up for further investments at oil and gas.”
The sector has repeatedly warned that the windfall tax has disproportionately hurt smaller operators, and that it has impacted lending capacities.
The report also notes a decline in exploration and appraisal (E&A) activity over the last 20 years is having an effect subsequent drilling.
Meanwhile the total development spend in 2022 was £1.23bn, down slightly from £1.33bn in 2021, indicating that average wellbore costs in the UK have risen.
A total of 96 million barrels of oil equivalent of discovered resource was made in 2022.
Positively, 77 E&A wells are forecast for 2023-25, with 12 in 2023, 17 in 2024 and the remainder in 2025.
NSTA director of New Ventures, Andy Brooks, said: “We are committed to helping ensure UK energy security and well interventions which increase production from existing facilities can play a key role in that. Production from existing facilities can also have a lower carbon footprint.
“It is also vitally important that we increase development drilling in order to sustain domestic supply, and we are encouraged by the forecast pick-up on Exploration and Appraisal activity in the next few years.”
This week, OEUK warned that a drop in domestic supply will increase relaince on higher-carbon imports – read more here.