The economics of petroleum exploration and development west of Scotland

This paper examines the economics of oil and gas exploration and development in the West of Scotland region. A considerable exploration effort has resulted in some discoveries but the overall success rate has been quite low. The region is comprised of several distinct geological basins. To date the Judd Basin has experienced the best discovery rate. Expected returns as measured by expected monetary values are generally low, confirming the high-risk nature of the region. The most economical field development concept depends to a large extent on a combination of field size and water depth which vary markedly from basin to basin. In typical cost conditions at an $18 price returns to investors in medium and large-sized fields at the development phase are positive, but at $14 only when costs are relatively low are positive returns in prospect. Stand-alone gas developments are very unlikely to be viable in current market conditions. The fuller exploitation of the whole region requires higher oil and gas prices and /or significant innovation and technological progress.