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Oil exploration in the UK at a 15-year low

Luke Graham, News Assistant

Drilling for oil in the U.K. has reached a 15-year low, but there are signs of growth ahead, according to industry experts.

Exploration and appraisal (E&A) drilling in the U.K. and the North Sea have declined in recent years as oil companies have cut their budgets, partly in response to the collapse in oil prices and the global supply glut.

In fact, there has been no new E&A activity in the U.K. since October 2015, according to a report by 1Derrick, an oil and gas research company. In 2012, 41 wells were being drilled for exploration, down to 28 in 2014 and just 20 in 2015, the lowest since 2001.

"In 2016, 1Derrick anticipates a further dip in the E&A activity, with only 15 wells expected," said Rajeev Singh, senior analyst at 1Derrick, in a press release.

Gareth Mccormack | Lonely Planet Images | Getty Images

According to the report, international exploration will continue to slow, as companies cut costs to focus on assets with a greater return on investment. France's Total has cut its global exploration budget for 2016 by 21 percent, while the Tullow has cut its budget by 60 percent.

Despite this downturn, there are some pockets of positive news. For instance, North Sea oil production actually increased in 2015, according to Spencer Welch, director of oil markets and downstream for IHS.

"For virtually all existing production platforms, current market prices of $30 per barrel still cover variable operating costs, so the incentive is still there to maximise production and cover more of the fixed costs," he told CNBC via email

"IHS does not expect North Sea production to increase again in 2016 but we do expect production to be similar to 2015."

Welch added that he expects the North Sea industry to still be producing for many years to come.

"IHS expects oil prices to gradually rise in the period 2017-25, once oil supply and demand has come back into balance, and so some new North Sea production is likely to come on-stream in the future," he said.

And expectations are high for an oil well in the south-east England. This week, U.K. Oil & Gas Investments announced it was able to extract 463 barrels of oil a day from a site in Surrey, nicknamed the "Gatwick Gusher", as part of a flow test.

"Tests so far show oil has flowed to the surface under its own pressure and has not, so far, required artificial lift," said Stephen Sanderson, the company's executive chairman, in a press release.

In 2014, the company claimed tests at the site near Gatwick Airport indicated there was more than 3 million barrels in the well.

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