Despite the mature status of the UK Continental Shelf (UKCS) and the Norwegian Continental Shelf (NCS), successful exploration drilling campaigns combined with redevelopment and enhanced recovery programmes means that more players than ever have converged on the North Sea in recent years, leading to renewed optimism about opportunities in the region. These are the findings from the Energy Industry Council (EIC)’s latest report into contracting activities offshore Norway and UK based on EICDataStream, the EIC’s global project database that tracks over 10,000 active and future projects worldwide.
According to EICDataStream, there are currently 271 projects proposed or under development on the UKCS and NCS, worth a total potential investment of US$262.3 billion. Between January 2010 and July 2014 there were 482 major contracts (FEED, EPC and SURF) awarded on projects offshore UK and Norway: 203 EPC (Engineering, Procurement & Construction) contracts, 170 Subsea/SURF (Subsea, Umbilicals, Risers & Flowlines) contracts, and 109 FEED (Front End Engineering Design) contracts. Figure 1 illustrates a decline in the number of contracts awarded since 2011. Based on figures so far this year, the number of EPC contracts has suffered the most serious decline since 2012, followed by the number of Subsea/SURF contracts, while the number of FEED contracts awarded so far in 2014 is close to reaching 2013 figures. \
Despite the decline in contracting levels, a move to utilise existing infrastructure to tie-in marginal fields, enhanced production technologies, government intervention and a dramatic increase in exploration is likely to ensure healthy contracting levels for the foreseeable future.
Taking a closer look at contracting levels offshore Norway and the UK, activity in Norway peaked in 2011 to 2012 and has entered fairly rapid decline since, with just six major contacts awarded in 2014 up until July. Activity in the UK also peaked in 2011, but has declined at a steadier rate, with 16 major contracts in 2014 up until July. In contrast to the UK where the Government has introduced a number of tax allowances in the last few years, the Norwegian oil and gas industry is being impacted by the introduction of new tax rules in 2013, in addition to high costs. The increase has seen a number of operators delay developments to reconsider development concepts under the new tax regime, Statoil’s Snorre and Johan Castberg projects being two such examples.