Deloitte highlights slump in E A

Offshore UK oil and gas exploration and appraisal (E&A) activity dropped by more than 35% in 2009 compared with the year before, according to the latest oil and gas industry figures released by professional service firm Deloitte.

The audit, tax and corporate adviser said yesterday that during the past 12 months 78 exploration and appraisal wells had been started.

This was a fall from 121 in 2008 and down to a level last seen in 2004.

The Deloitte review, produced by its petroleum services operation, highlighted that exploration well numbers had almost halved during 2009 and appraisals were down 25% on the year before.

In addition, during the final quarter of 2009 only 13 wells were started, 54% fewer than in the third quarter and 38% fewer year-on-year.

Throughout 2009, the area which suffered most was the northern North Sea, with activity down 65% compared with the year before, Deloitte said.

Activity fell overall by 60% in the southern North Sea while the central North Sea saw a 47% decrease and the Moray Firth witnessed a 26% decrease in new drilling, however, there was a rise in drilling activity west of Shetland and the Atlantic margin with a 23% increase, while the first wells were drilled in the East Irish Sea since 2005.

Derek Henderson, senior partner of Deloitte in Aberdeen, said: “In 2009 companies needed to prioritise cost control and implement strategies to ensure they achieved as strong a financial position as possible during the recession. Although 2010 has heralded a much more positive outlook, the economy remains fragile and many energy firms will continue to implement those strategies that have served them well during 2009.

“Looking forward, we would hope that less volatility in commodity prices and more stable operating conditions would improve confidence and overall activity levels.”