1、1 BUSINESS OUTLOOK 2020 ECONOMIC REPORT 2020 2 Our vision is to ensure the UK Continental Shelf becomes the most attractive mature oil and gas province in the world with which to do business. Read all our industry reports at www.oilandgasuk.co.uk/publications The UK Oil and Gas Industry Association

2、Limited (trading as OGUK) 2020 OGUK uses reasonable efforts to ensure that the materials and information contained in the report are current and accurate. OGUK offers the materials and information in good faith and believes that the information is correct at the date of publication. The materials an

3、d information are supplied to you on the condition that you or any other person receiving them will make their own determination as to their suitability and appropriateness for any proposed purpose prior to their use. Neither OGUK nor any of its members assume liability for any use made thereof. 3 C

4、ontents Foreword 4 Report at a glance 6 The changing economic and energy environment 8 The UK and global economy a year of rapid change 8 Global energy demand 10 UK energy dynamic 12 Achieving net zero UK challenges and opportunities 14 Investing in our energy future 15 The evolving role of the oil

5、and gas industry 19 Oil market dynamics 19 Gas market dynamics 22 The oil and gas industrys role in supporting UK energy security 25 Maintaining investment in the UKs the oil and gas industry 26 The industrys macro-economic contribution 32 Embracing new opportunities the new energy landscape 33 Lead

6、ing energy transition: a UK supply chain perspective 35 Providing cleaner energy addressing oil and gas industry production emissions 37 Helping to lower the emissions of the wider economy 39 Setting the framework for success 42 Economic Report 2020 ECONOMIC REPORT 2020 4 T he oil and gas sector, an

7、d the economy more widely, have experienced enormous disruption during 2020 due to the coronavirus pandemic. As our Economic Report 2020 shows, the sharp fall in global GDP links closely to the drop in global energy demand. It contributed to the triple whammy cited by OGUK earlier this year as compa

8、nies dealt with the operational impact of COVID-19 alongside volatile and low oil and gas prices. The large reductions in global energy demand resulting from measures to restrict the spread of the virus depressed commodity prices severely, threatening the viability of some operations. During April 2

9、020, Brent crude spot prices fell to their lowest level, in real terms, for more than two decades, and other global benchmarks were affected even more severely, including a period of negative West Texas Intermediate prices in the US market. Gas prices have also been similarly depressed throughout 20

10、20, continuing the trends seen in recent years. As a result, activity levels in terms of exploration, well appraisal and developments have been significantly undermined. Businesses have had to make significant adjustments to the way they work, rescheduling their plans with respect to both new invest

11、ment and asset maintenance, whilst continuing to safely provide the UK with secure and affordable energy. By and large the sector has been able to make these day- to-day adjustments successfully. However, the economic impact of the pandemic on companies, particularly in the extensive supply chain, h

12、as been severe. Activity levels, revenue and margins continue to be undermined at a time of additional uncertainty as the post-Brexit transition period ends. Despite the many challenges brought by the pandemic, UKCS production is expected to remain around 2019 levels of almost 1.7 million boepd. The

13、 avoidance of large disruptions to output is a testament to the professionalism of our members and to the embedded health and safety culture that prevails throughout the industry. OGUK, on behalf of industry, responded to these unique challenges by setting out a three-phase framework plan which seek

14、s to protect jobs and businesses, recover activity and investment, while accelerating the opportunities that the energy transition can bring, both at home and abroad. While the UK economy is expected to see a 11.3 per cent decline in GDP this year, domestic CO2 emissions Foreword 5 have only fallen

15、by an estimated 10.2 per cent so far this year, while global emissions have reduced by around 5.5 per cent. These relatively small emission reductions, which resulted from significant economic and personal hardship, underline the challenge and opportunities faced by governments in delivering a susta

16、inable recovery through lower carbon energy and industrial processes. Even during the pandemic, the sector continued to drive forward with Roadmap 2035 and its focus on ensuring that maximising economic recovery is inextricably linked with delivering net zero. Indeed, companies remain committed to r

17、educing emissions associated with the production of oil and gas, and continue to be some of the biggest sectoral investors in offshore wind, hydrogen, carbon capture and storage solutions. In addition, industry is currently engaged in discussions with the UK Government about a North Sea Transition D

18、eal. If successful, this would act as a catalyst to help stimulate jobs and provide energy security while transitioning to a net-zero future, in alignment with the Prime Ministers recently published ten-point plan. The industry has already set ambitious targets to ensure it delivers significant emis

19、sions reductions from its own operations. At the same time, carbon capture, usage and storage (CCUS) and the hydrogen economy represent important opportunities for the sector to help other industries decarbonise; they also play to our domestic supply chains strengths to deliver CCUS at scale. As new

20、 regulatory and business models develop our sector can provide solutions and expertise by leveraging our existing skills base and supply chain capabilities. 2020 has been a hugely challenging year and while the timeframe for the recovery of the UKs changing offshore oil and gas industry remains unce

21、rtain, it is clear that with the right support, it can continue to earn its place in the UKs energy future. As our Economic Report shows, there is now a clear pathway for our sector to help push forward a green recovery, create new jobs and support those in energy communities across the country, pro

22、viding secure, affordable and lower-carbon energy and products. Deirdre Michie OBE, Chief Executive, OGUK ECONOMIC REPORT 2020 6 Report at a glance Impact of COVID-19: Global energy demand is expected to decline by 5% in 2020 1720 18201920 2020 Brent crude averaged $41/bbl YTD $23/bbl lower than 201

23、9 Global gas demand expected to fall by 4% in 2020 - the largest annual decline in history UK GDP is expected to fall by 11.3%, the largest decline in 300 years The impact of the pandemic has resulted in a 4.4% fall in global GDPUK total energy demand was down 12% in the first 3Qs of the year 2020 g

24、lobal oil demand expected to total 91.3 million bpd, down 8.8 million bpd on 2019, resulting in severe oversupply and price volatility Global upstream investments expected to decrease by 40% to $300 billion this year compared to 2019 The UK met 61% of oil and gas demand from indigenous resources in

25、2019 61% UKCS production is expected to remain around 2019 levels of almost 1.7 million boepd - despite the many challenges brought on by the pandemic Six exploration wells spudded in 2020, the lowest on record However, at the start of 2020 there were over 135 E however will still amount to levels f

26、ar in excess of domestic production in 2050. In a world where sustainability is a priority, it has to be the case that the UK makes the most of its own resources rather than meet demand by imports, offshoring emissions and consuming other countries resources instead. Investing in finding and develop

27、ing new resources on the UKCS allows the UK to maximise our indigenous resources and minimise net imports, provided we do so in a manner which allows for continued cuts to our own emissions. Continued investment in the progression of opportunities is crucial in managing the basins production profile

28、. Failure to do so will result in domestic production declining at a 2P reservescontingent mean prospective 5.2bn7.4bn4.1bn 10-20bn boe left in the UKCS 37 https:/www.theccc.org.uk/publication/net-zero-the-uks-contribution-to-stopping-global-warming/ 38 Resources Source: OGA 27 0 0.5 1 1.5 2 2.5 3 3

29、.5 4 4.5 5 0 2 4 6 8 10 12 14 16 18 Daily Production (Million boepd) Capital Investment (billion - 2019 Money) Capital ExpenditureProduction Source: OGA, BEIS, OGUK averaged 5.5 billion per year) total UKCS production fell by half. Annual decline rates averaged 7 per cent across the decade, though t

30、he rate of annual decline peaked as high as 11.4 per cent in 2006. In comparison, total UK oil and gas consumption only fell by 9 per cent during this decade. This trend saw the UK move from being a net exporter of oil and gas, to a net importer. By contrast, the decade between 201019 has seen an al

31、most doubling of capital investment compared with 200009. Most of this investment was committed at the beginning of the decade, with recent years more in line with longer-term trends. The significant ramp up in investment between 201014 has resulted in improved production performance, with an annual

32、 average decline rate of only 3 per cent between 201019. Importantly, there was a 20 per cent increase in production between 201419, as output was boosted by a wave of new field start-ups following these high levels of investment. Despite the scale of the challenges faced this year, the industry has

33、 continued to deliver strong production performance, with output relatively in line with 2019 at just under 1.7 million boepd (around 600 million boe). However, the slowdown in new development activity and investment does give rise to concern around the impact on production in the coming years. The

34、trajectory of the production trend will be defined by the extent to which industry is able to find and develop new resources. Production is anticipated to return to a decline, however there are clear opportunities to manage this trend in line with the ambitions of Roadmap 2035, by investing accordin

35、gly. There are more than 35 billion of capital investment opportunities identified within company plans over the next ten years, all with varying probabilities of progression. Halting this investment in the industry will do nothing to reduce consumption of oil and gas, it will only mean that the UK

36、will become even more reliant on net energy imports, to the detriment of the wider economy. UK Oil and Gas Investment and Production ECONOMIC REPORT 2020 28 In a no-further-investment scenario, it is possible that production will decline by around 50 per cent by 2025, meaning that net imports of oil

37、 and gas would inevitably increase. The improvements in the competitveness of the basin in the second half of the decade have attracted a range of new investors to the UKCS. The eco-system of players operating in the basin has evolved significantly in recent years, particularly those engaging with e

38、xploration activity in the basin. Compared to 2010, the number of private equity-backed companies has trebled, with several international investors entering the basin for the first time. Alongside this, and despite rationalisation of portfolios, major mulitnationals have also maintained a strong foo

39、tprint on the UKCS. These key changes to the landscape signal the attractiveness of the UKCS from an investor perspective. OGUK views this positively as it brings fresh perspectives, new ways of working and new investment. It represents a healthy evolution of business models as the basin continues t

40、o mature. 0 100 200 300 400 500 600 700 2002020224202520262027202820292030 Production / Reserves (Million boe per year) Sanctioned Volumes 70-90% Chance of Development Produced Volumes 90% Chance of Development 70% Chance of Development Roadmap2035 Production Profile Source: OG

41、A UKCS Resource Outlook 29 INDUSTRY Highly skilled and adaptable workforce Comprehensive and publicly available data Competitive and Predictable fiscal regime Access to extensive infrastructure network Significantly improved cost base and efficiencies Supportive tripartate relationship Committed to

42、a net-zero future World-leading HSE culture Established and collaborative supply chain Why invest in the UKCS? 10-20 billion boe remaining resource potential ECONOMIC REPORT 2020 30 In order to support energy security it will not, however, be enough to solely focus on known reserves; it is crucial t

43、hat exploration for new opportunities continues. The UK will consume far more oil and gas on the path to net zero, and beyond, than it is able to produce from current known reserves and contingent resources in the basin. It should also be noted that many known opportunities have a relatively low cha

44、nce of progression due to commercial and technical challenges. This dynamic, along with commitments to achieve net zero emissions from the production of oil and gas by 2050, mean that continued exploration on the UKCS is compatable with the nations drive to net zero. It is important that this contin

45、ues to be recognised by both government and regulators. 0 10 20 30 40 50 60 70 20000192020 Forecast Exploration and Appraisal Well Spuds Exploration Appraisal Source: OGA, OGUK Continued exploration on the UKCS Coming into 2020, OGUK anticipated relatively stable lev

46、els of activity across the basin, including exploration. This reflected the prevailing market conditions at the time and improving investor sentiment across the industry. However, the impact of COVID-19 has had a profound effect on this outlook. Only six exploration wells have gone on to be spudded

47、representing record-low activity in the basin. This is largely the result of the need to preserve capital in the face of low cash flow generation and the extreme uncertainty around market developments. Five of these wells were spudded by Apache in the Beryl area of the northern North Sea (including

48、three geological sidetracks), alongside the potentially high-impact Finzean well spudded by Total E supporting net zero; developing people and skills; driving technology and innovation; and growing the economy and exports. Good progress has been made since its launch in September 2019, including, bu

49、t not limited to, the development of production emissions targets, launch of the Diversity world-class decarbonisation capabilities having completed more than 130 CCS studies in the last 30 years; and a market-leading position in hydrogen, having licensed, designed and installed over 120 hydrogen units globally. At the same time, Wood remains committed to the oil and gas sector and is actively partnering with operators to help them achieve their energy transition goals. This includes using renewables to electrif