Energy in a Competitive Market

Energy in a Competitive Market

Essays in Honour of Colin Robinson

Edited by Lester C. Hunt

This fine collection of original essays is in recognition of Colin Robinson, who has been at the forefront of thinking in energy economics for over 30 years. Energy in a Competitive Market brings together both prominent academics and practitioners to honour his outstanding and unique contribution. The authors cover a wide and fascinating selection of topics incorporating the whole spectrum of energy economics. In doing so, they examine the belief that markets are the key to the effective allocation of resources, a notion which arguably applies as much to energy as it does to any other commodity.

Chapter 8: The economics of field cluster developments in the UK continental shelf

Alexander G. Kemp and Linda Stephen

Subjects: economics and finance, competition policy, energy economics, public sector economics

Extract

8. The economics of field cluster developments in the UK continental shelf Alexander G. Kemp and Linda Stephen INTRODUCTION The UK North Sea is now in its mature years. Oil production has peaked. Gas production will continue to grow for another few years on the basis of fields under development, but thereafter decline is very likely. The average size of discovery has been falling for many years, and over the last few years the exploration success rate and the exploration effort have been lower than in earlier periods. There is, however, a substantial inventory of undeveloped discoveries. The industry is currently seriously examining for development over 50 ‘probable’ fields as well as over 70 incremental investment projects in mature fields. A further 278 discoveries containing information on their possible size, type (oil, gas, condensate), and location by block number are in a database constructed by the present authors. Most of these undeveloped discoveries are quite small. On a stand-alone basis many are not economically viable. This leads to the notion that joint development of a group of fields might be viable where individual projects remain unattractive. Joint development could involve benefits from (a) economies of infrastructure cost sharing and (b) risk sharing. These subjects are investigated in this chapter. INITIAL SCREENING OF POTENTIAL It is likely that the most economical method by which new field developments can be undertaken is via the utilization of existing major infrastructure. This includes pipelines and processing facilities on platforms. Sometimes new fields...

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