UK Continental Shelf (UKCS) production has managed to surprise to the upside over the last few years despite the challenging financial and operating environment. Field-level data from the Oil and Gas Authority (OGA), the UK regulator, for January-October 2017 show UKCS production of 38.8 bcm, up by 1.6 bcm (4%) y/y. Annual output has also risen every year since 2014, following 13 consecutive years of annual decline.
The rebound in UKCS supply has come at a welcome time for the UK market given recent changes to the country’s supply sources—including sharp cuts to Dutch production—as well as the closure of the Rough storage facility, leading to questions about how long such a renaissance might last.
Field-level data reveals that rising associated gas production has been one of the main drivers behind the rise in total UKCS output from 2014, helping offset a roughly steady decline in dry gas production. This is partially because most of the new fields that have come online in recent years have been associated gas fields. However, our production forecasts suggest that this trend will reverse in 2018, with small increases in dry gas production unable to offset sharp declines in associated gas production.
The recent uptick in UK production—especially in the last two years—has also occurred because many of the fields that have been brought online in recent years have predominantly been big satellite gas-condensate fields, which tend to ramp up quickly, hitting plateau as much as 36 months faster than a main gas field. The result is that increases in annual production are quick to appear but are very short-lived.
We forecast aggregate production to edge down by about 0.3 bcm (1%) y/y in 2018 to 46.2 bcm, followed by a heftier y/y decline of 5 bcm (11%) to 41.2 bcm in 2019. In 2020, we forecast production of roughly 37.2 bcm, down by 4 bcm (10%) y/y.
Post 2020, there are few projects so far slated to come online. But data on UKCS reserves reveal that about 50% of reserves are gas-condensate. As main oil, satellite gas and satellite gas-condensate fields—characterised by a quick ramp-up, short plateau and steep decline profiles—make up an increasingly larger share of UKCS output, aggregate production is more likely to be punctuated by sharp rises in the years when big fields are brought on, followed by sharp drops in output owing to short plateaus and quick declines.