johnathan reynolds presentation gybb 12.11
TRANSCRIPT
Challenges and Opportunities in the
Offshore Energy Sector
Norfolk Chamber breakfast – 12th November
Policy Context
• Budget 2015• Reduction in Supplementary Charge from 30% to 20% • Reduction in rate of PRT from 50% to 35%• Give Oil & Gas Authority new mandate to scrutinise decom plans• £20m support in 15/16 for seismic and other geoscience surveys to catalyse UKCS
E&P
• UK energy policy • Investing in low carbon generation, recognising gas as a key ‘transition’ energy
source• Change to Contracts for Difference supporting new renewable energy projects • Security of supply and lower energy prices are the major drivers• Increasing UK content in energy projects, whilst reducing costs
Energy Sector Profile - Comparison
2013 Strategy 2015 Update Comparison
Employment 7,710 8,469 +9.8%
Number of Businesses 797 834 +4.6%
GVA £1.43bn £1.6bn +12.6%
GVA per employee £185,473 £189,800 +2.3%
Business Turnover £3.18bn £3.62bn +13.8%
Electricity Generation – Installed Capacity 2015
Source: Nautilus Associates / 4C Offshore 2015
£3.7bn
£5bn
£3.3bn
£2.5bn
£1.9bn
53%
1%8%
22%
0%
14%2%
Offshore Wind
Onshore Wind
Solar
Nuclear
Landfill Gas
CCGT
Biomass414MW
2.83GW
1.2GW
740MW
Onshore: 2,542MWOffshore: 2,834MW
Capital Investment Forecasts to 2020Source: Nautilus Associates / 4C Offshore
East of England
£18.5bnUnited Kingdom
£159bn
789 Projects
North West Europe
£191bn
Size of the opportunity – towards 2020
Source: Nautilus Associates / 4C Offshore 2015
0
5000
10000
15000
20000
25000
30000
35000
40000
2015 2016 2017 2018 2019 2020
Tota
l CA
PEX
Inve
stm
ent
(£m
)
Developer Articulated Construction Year
Solar
Tidal
Gas
Biomass
Onshore Wind
Transport
Oil & Gas Decom.
Power Transmission
CCS
Offshore Wind
Nuclear
Offshore Oil & Gas
£45bn £27bn
£21bn
£10bn
Size of the opportunity – towards 2020
United Kingdom
Source: Nautilus Associates / 4C Offshore 2015
£114bn
£113bn
£32bn
Offshore Oil & GasNuclearOffshore WindGasCCSTransportPower TransmissionBiomassOil & Gas Decom.Onshore WindPortsTidalSolarWave
£45bn
£27bn
£21bn
£7.3bn
Offshore Wind
Oil & Gas Decom.
Offshore Oil & Gas
Transport
Gas
Power Transmission
Ports
Solar
Biomass
Onshore Wind
Size of the opportunity – towards 2020
East of England
Source: Nautilus Associates / 4C Offshore 2015
£3.7bn
£5bn
£3.3bn
£2.2bn
£1.9bn
Energy Prices
Source: Cornwall Energy
Breagh A Platform
Home to UK’s offshore gas industry, worth billions!
• Exploration
• Production• Storage
Oil & Gas
Offshore Gas – UKCS
In 2014:
• spent £9.7bn operating the UKCS, c.8% up on 2013.
• invested £14.8bn of capital
• spent £1.1bn on seismic data and 18 appraisal wells
• Spent £1bn on decommissioning activity
• produced 1.42m boe per day, 1.1% less than 2013. Best year-on-year performance in 15 years!
• Paid >£4.7bn in production taxes (2013/14), and expects to contribute <£2.8bn (2014/15)
Total UKCS Expenditure
Total expenditure on the UKCS reached £26.5bn in 2014, the highest on record for the fourth successive year.
Tota
l Exp
end
itu
re (
£b
n–
20
14
mo
ney
)
DevEx hit hardest??
Opex more secure??
Crude oil price forecast
Source: Cornwall Energy, data from the World Bank, IMF and Economisthttp://www.worldbank.org/content/dam/Worldbank/GEP/GEPcommodities/PriceForecast_20150422.pdfhttp://www.imf.org/external/np/res/commod/index.aspxhttp://gfs.eiu.com/Article.aspx?articleType=cf&articleId=663259050&secId=0
Gas price forecast
Source: Cornwall Energy, data from the World Bank and IMFhttp://www.worldbank.org/content/dam/Worldbank/GEP/GEPcommodities/PriceForecast_20150422.pdfhttp://www.imf.org/external/np/res/commod/index.aspx
UKCS Production Forecast
Welland Platform being decommissioned in 2011
Decommissioning 2015 – 2023
£14.6bn expenditure
(24% SNS)
Sizewell B Power Station1.2GW Capacity Nuclear
Sizewell C
£14bn+ expenditure
Sizewell A Decommissioning
Sizewell B1.2GW capacityoperational until 2035
Sizewell C3.2GW capacityplanning phase
At the time Sizewell B was being built it
was the largest civil engineering project
second only to the channel tunnel.Source: British Energy
63%of UK’s installed capacity is off the East Anglian Coast!
The UK has more operational wind farms than the Rest of the World combined!
Offshore Renewables
Size of the Market
Ensign Platform
Initial Feedback from Businesses and Workshops
Oil & Gas Task Force
Consultation feedback
• Mixed feedback that the oil price was having a direct impact
• The price fall has highlighted existing problems within the SNS. It is highly taxed, has ageing assets etc., and this has been masked by the previous higher prices.
• It was felt that difficulties could last until 2017.
• Exploration drilling is on hold with no plans until early 2016.
Region’s Prospects:
• Overall, the prospect seems good, however numerous organisations commented that there was no direct correlation between the gas and oil price and operators were using the low oil price as an excuse to reduce costs.
• Whilst there were new discoveries e.g. Cygnus and Platypus, exploration was deemed to be limited.
• No major operators based in the area and those that remain are looking at viability to stay
Priorities
• Immediate call for a fresh review of the Wood Review with a focus on SNS rejuvenation plan
• Strong engagement with the OGA and DECC to ensure the SNS, and gas, is properly supported
• Develop an collaborative industry vision similar to offshore renewables, both target price and levels of UK content in all projects
• Develop business and supply chain support package, targeting potentially vulnerable firms
Funding & Investment
• Availability of financial support was seen as important, but not critical. Professional and expert support would be of greater benefit.
• Funding landscape seen as complicated with little support on how best to navigate
• Potential to create a flexible investment fund or convertible loan to help firms through challenging cash flow periods
