The Economic Report 2015

Transcription

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2 The Economic Report 2015

3 Chaired by Deirdre Michie, Chief Executive, Oil & Gas UK This morning s speakers are Adam Davey, Oil & Gas UK John Pearson, Amec Foster Wheeler Tove Stuhr Sjøblom, Statoil

4 Deirdre Michie Chief Executive Oil & Gas UK

5 The Economic Report 2015 Adam Davey Economics and Market Intelligence Manager Oil & Gas UK

6 Economic Report 2015 Adam Davey Economics and Market Intelligence Manager

7 Agenda UKCS Market Conditions Performance Indicators Restoring UKCS Competitiveness Future Opportunity 7

8 Oil price has more than halved over last twelve months after three years of high and stable prices Brent Oil Prices ($/bbl) 140 Brent Price (Nominal) 120 Brent Price (Real) *2015 predicted average * Source: Argus Media, BP 8

9 Sustained period of low oil price is beginning to impact front winter gas price 9

10 The future oil price delivery curves show how market expectations have changed rapidly Brent Futures Daily Settlement Prices ($/bbl) End December 2013 Mid 2014 End December 2014 August Source:IntercontinentalExchange 10

11 The UKCS has benefitted from a wave of investment over the last five years but the future is less certain Capital Investment ( Billion Money) bln bln 6-8 bln 4-7 bln Source: Oil & Gas UK 11

12 Operating costs have routinely grown by 10 per cent per year over the first half of this decade 12 Operating Cost ( Billion Money) Q Forecast -4% -6-10% Q Forecast Source: Oil & Gas UK 12

13 There are numerous examples of efficiency improvements that can be seen within the industry 13

14 Cost and efficiency improvements should bring average UOC down to 15/boe average by 2016 Latest opex changes Impact on UOC Total OPEX ( billion) bln bln Existing Fields Reduction from Existing Fields Contribution from New Fields 9.3 bln 8.6 bln / /16 New Fields Source: Oil and Gas UK Unit Operating Cost ( /boe Q Forecast Q Forecast Source: Oil & Gas UK

15 Exploration drilling continues to yield disappointing results in the UK Exploration and Appraisal well count - UKCS Number of Wells Drilled Exploration Exploration Sidetracks Appraisal Appraisal Sidetracks Source: DECC, Oil & Gas UK

16 Decommissioning activity is set to increase over the course of the decade 2.5 Decommissioning Expenditure ( Billion) Source: Oil& Gas UK 16

17 Production is responding to sustained investment and improved production efficiency Production (Million boepd) % production decline 15-20% production decline Production stabilised and Improving Upper Central Lower Source: Oil & Gas UK

18 Negative post-tax cash flow (- 4.2 billion) in 2014, the first since 1977, is unsustainable Cash Flow ( Billion Money) Gross Revenue Post-Tax Costs Post-Tax Cash Flow Source: DECC, Oil & Gas UK

19 Companies are making difficult decisions C.440,000 employed at start of ,500+ direct job losses employment estimated at 375,000 Steady and sustainable investment may stem employment decline

20 The oil and gas industry remains a key economic asset for the UK 100,000s of Jobs 11.5 to 22 Billion boe Diverse Supply Chain bln of Exports

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22 Moving the Industry Forward John Pearson Group President Northern Europe and CIS Amec Foster Wheeler

23 The Efficiency Task Force John Pearson Co-chair Oil & Gas UK

24 The Efficiency Problem The amount industry is spending 24

25 The aim - to achieve transformational change Cost Reduction Efficiency Improvement Transformational Change 10-15% Spend reduction Tactical process improvements Cost avoidance 3 9 months 15-25% Activity reduction Consolidation Organisation design Technology 5 18 months 25-40% Asset / service / geographic restructure M&A + network integration Operating Model months 25 Source:- Deloitte LLP

26 Opportunity is out there The demand for our product isn t going away and there s still oil and gas to recover There could be over 20 billion boe still to find on the UKCS Oil and gas currently account for 70 per cent of the UK s primary energy need a figure which will remain unchanged until at least 2030* *According to DECC figures 26

27 but we must become more efficient We must keep our cost base in line and get on a more competitive footing for the future The oil price has more than halved from over $100 per barrel in September last year The cost of oil and gas operations more than doubled between 2009 and

28 and learn from each other and other industries Business is never so healthy as when, like a chicken, it must do a certain amount of scratching around for what it gets. - Henry Ford 28

29 We ll take a targeted approach broadening our impact as projects grow We re not trying to boil the ocean. 29

30 Oil & Gas UK - Efficiency Task Force (ETF) The ETF will drive pan-industry improvement to create a sustainable sector... Business Process Standardisation Co-operation, Culture and Behaviours 30

31 We need to get companies throughout the supply chain involved On a global-scale we are a small player, but we re also a world-leader exemplified by the quality, the capability of our supply chain. The Efficiency Task Force with provide us with the vehicle we need to enact change quickly and effectively with those companies who are ready and willing to be the early adopters of such change. 31

32 32 Getting involved today

33 UKCS Potential Tove Stuhr Sjøblom Senior Vice President for Development and Production Statoil

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35 The Economic Report 2015

36 Chaired by Deirdre Michie, Chief Executive, Oil & Gas UK This morning s panellists are Adam Davey, Oil & Gas UK John Pearson, Amec Foster Wheeler Tove Stuhr Sjøblom, Statoil Paul Goodfellow, Shell U.K. Limited

37 Forthcoming Events September Economic Report Roadshow Norwich, Newcastle and London September 2015 Oil & Gas UK Legal Conference 29 September 2015 Security Seminar 1 October 2015 Occupational Health Seminar 4 November 2015 Share Fair 5 November 2015 Oil & Gas UK Awards November 2015 Offshore Decommissioning Conference 25 November 2015 Environmental Seminar

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