Hydrocarbon Development in the North Sea
In 2017, 360 MMboe of new oil and gas resources were discovered in the North Sea. This is just a fraction of what was found during the period from 2009 to 2011, when an average of 2,500 MMboe was discovered per year. Among E&P companies and suppliers, the low exploration success has raised concerns that we could be running out of new projects ready for development in the North Sea.
Contingent Resources in the North Sea
By tracking every discovery in the North Sea, Rystad Energy is able to analyse how not-yet-sanctioned resources, often referred to as contingent resources, have developed over the last 15 years (see figure above). In 2005, contingent resources were around 17 Bboe. This number declined to 14 Bboe by 2007, due to high sanctioning activities, before the oil price collapsed in 2008. From 2008 until 2010 the contingent resource volume increased as new fields were found, the key discoveries being Johan Sverdrup, Lancaster/Halifax, Culzean and Maria. In total,the contingent resources grew to 19 Bboe by 2010. This volume remained stable for the next five years, before dropping in 2015, when Johan Sverdrup was sanctioned. Since then the contingent resources figure has been stable at around 16 Bboe.
Projects in the Pipeline
That said, over the next two years we might be in for a change. As the oil price remains high and E&P companies bring down costs and breakeven prices for new projects, sanctioning activity is expected to pick up in 2018 and 2019. Projects such as Johan Castberg, Johan Sverdrup (Phase 2), Troll West, Rosebank/Lochnagar and the Snorre expansion are all expected to be sanctioned over the next two years. By sanctioning these fields, contingent resources will be reduced by almost 5 Bboe, while at the same time the size of the sanctioned projects in the pipeline will drop considerably. This shows that we are starting to run out of viable projects in the North Sea. With the exception of Lancaster, Krafla/ Askja, Wisting and Alta/Gohta, the landscape will be dominated by small subsea projects.
The fact that the number of large new development projects in the North Sea may start to decline should be a concern for anyone involved in the upstream sector. It shows yet again that we need to focus on exploration efforts and open up new areas to exploration.
This Regional Update is brought to you by Rystad Energy.