A NEW study by Professor Alex Kemp and Linda Stephen of the University of Aberdeen highlights the high degree of sensitivity of future activity in the United Kingdom Continental Shelf to oil and gas price behaviour.
Field investment and production over the long term were found to be extremely sensitive to oil and gas price behaviour across the three scenarios chosen for the modelling, namely (1) $50, 35 pence, (2) $60, 45 pence, and (3) $70, 55 pence all in real terms.
Total hydrocarbon economic recovery over the period 2019-2050 at these three price scenarios was found to be (1) 8.7 billion barrel of oil equivalent, (2) 12 billion barrel of oil equivalent, and (3) 14.5 billion barrel of oil equivalent, respectively.
The production decline rate at the low price is quite sharp but very much more gentle at the high price.
Development and operating expenditures are also very sensitive to the oil and gas price behaviours.
Thus, at the $50, 35 pence price case total field development expenditure over the period 2019-2050 is £51.6 billion, at the $60, 45 pence price case it is nearly £90 billion while at the $70, 55 pence case it is £113 billion.
The number of fields in the category of technical reserves which pass the investment hurdle are particularly sensitive to the oil/gas prices assumptions.
Thus, at the $50, 35 pence price case only 81 fields in this category are developed.
At the $60, 45 pence case 207 fields in this category are developed.
At the $70, 55 pence case 238 fields in this category are developed.
Substantial numbers of these fields remain undeveloped by 2050 even with the $70, 55 pence price case.
Decommissioning costs over the period are somewhat lower compared to the researchers’ study last year because fewer new fields (technical reserves and future discoveries) are developed over the period.
At the $50, 35 pence price the costs accumulate to £43.2 billion by 2050, at the $60, 45 pence case the total becomes £45.4 billion, and at the $70, 55 pence case the total is £47 billion.
You can read the whole research here.