6 Oil and gas reserves
6.4 The UK context
For the sake of comparison, it is interesting to note that at the end of 2004 the UK had proved reserves of 4.5 billion barrels of oil (611 million toe) and 590 billion m3 of gas. This implied a R/P ratio of only about 6 years and a UK contribution of less than 0.5% to the world share of proven oil reserves, and about the same percentage for UK gas. These rather stark statistics conceal the fact there are probably still very significant reserves to be exploited. Remaining oil reserves at the end of 2004 were estimated to be between 23–31 billion barrels (3.2 to 4.2 billion toe), which is about the same volume that has been produced to date (Figure 19). Some of these reserves are proved because they are associated with producing fields, whilst the remainder fall within the probable and possible reserve categories as they are ascribed to undeveloped discoveries and exploration potential.
Figure 19: Oil reserves estimated to be beneath the UK continental shelf in 2004, compared with production up to 2004. Note that the proven reserves are included within the producing/being developed category, some of which are probable reserves because of remaining uncertainties. Undeveloped discoveries are mainly probable reserves, while the exploration potential covers possible reserves.
The exploitation of remaining reserves presents a major challenge to all stakeholders (operators, government, contractors, trade unions). Fields are smaller and more complex, unit costs are high and infrastructure may not be accessible – all these factors will determine the economics of development and dictate the lifespan of the British North Sea petroleum fields.
Whereas the UK passed its peak production in 2000 it is expected to remain self-sufficient in oil until 2009–10. UK gas production currently meets over 90% of demand and is forecast to fulfil 60% of demand in 2010. Thereafter, the North Sea will still sustain meaningful production for several more decades.
It would allow the relatively small discoveries that have been made in recent years to be developed and would sustain the production from existing fields through increased drilling and improved recovery factors. These measures should prolong the economic life of the North Sea fields and reduce the UK's need for importing oil and gas.
You should bear in mind, however, that the price of oil is mainly determined by the rate at which oil is produced from the vast oilfields of the Middle East, where costs are much lower than for North Sea fields. Much of the variability in oil price depends on political decisions in Middle Eastern oil-producing countries, and the extent to which political (and other) pressures from major oil importers affect those decisions.