The Economic Dependencies of Infrastructure Assets in the UK Continental Shelf (UKCS)

Abstract

Abstract The United Kingdom Continental Shelf (UKCS) is a mature region with around 42 billion barrels of oil equivalent produced since the late 1960s. The majority of the remaining estimated 15 billion barrels of oil equivalent reserves lie in more technical and challenging areas. To produce these reserves, access to existing infrastructure through subsea tiebacks for new and incremental projects or as new standalone development projects remain key to the future of UKCS and slowing the recent production decline. Currently, about 60 percent of all new fields in the UKCS are subsea tiebacks to existing infrastructure and there is an increasing interdependence for both production facilities and transportation infrastructure1. Many recent discoveries have been comparatively small and are not large enough to support their own infrastructure. This paper attempts to answer this critical question: how does the separation of infrastructure and field ownership affect economic recovery in a mature oil basin? We explore how possible different ownership structures and access arrangements might affect the economic viability of the remaining UKCS reserves by applying a mixed integer-programming model to field data from the Northern North Sea. Specifically, we consider the impact of a changing tax regime in a way that is relevant and consistent with unbundling infrastructure provision through cost sharing arrangements and how this affects the long-term economics of hubs and their user fields. The model is used to maximize the net present value of regional production (the maximum economic exploitation of the region) by determining the optimal set of new developments, tiebacks from fields to hubs, and timings of hub and field shutdowns. The effects of the separation of infrastructure and field ownership are captured by individual field and infrastructure viability conditions constraints.