UK drilling ‘continues decline’

19 October 2011, Sweetcrude, London – Offshore drilling activity in the UK North Sea rose 45% in the last quarter, but continues to fall overall, according to the latest industry figures.

Sixteen exploration and appraisal wells were spudded in the third quarter, the North West Europe Drilling and Licencing Review compiled by Deloitte shows.

This rate compares to just eleven in the second quarter, but is 36% lower than the third quarter of 2010, the report said.

So far this year 37 wells have been drilled, a 41% drop on the first nine months of 2010 and the lowest rate for the period in nine years.

Deloitte’s petroleum services group said this trend is not what would be expected during a period when the average oil price is more than $100 a barrel.

“Elsewhere in northwest Europe this buoyant oil price has driven high levels of drilling activity”, commented Deloitte petroleum services group managing director Graham Sadler.

For example, the Norwegian sector matched its best ever quarterly performance with 16 wells spudded on the Norwegian continental shelf in the past three months.

“It could be that factors including the relative geological maturity of the UK sector, compared to some adjacent regions, and the alterations made to the UK fiscal regime earlier this year have impacted business confidence”, Sadler said.

He said that general market instability combined with the tougher tax regime announced in March – under which oil and gas firms face taxes on profits of up to 81% – had hampered smaller companies’ ability to attract financing.

He said that a lack of availability for heavy-duty rigs was also a factor given the extreme conditions for exploration in the west of Shetlands area.

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