UK Regulator Hopes For Offshore Output Boost (Update)
(Adds comment from Siccar Point, para. 5)
The UK offshore regulator, the Oil and Gas Authority (OGA), has offered for award 123 licences over 229 blocks or part-blocks to 61 companies in the 30th Offshore Licensing Round, it said May 23. "These successful awards act as a strong platform for future exploration and production across the UK Continental Shelf (UKCS) and can help transform exploration activity levels," it said.
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The UK offshore has been hit by low oil prices in past years, and companies have cut their capital expenditure in response. But many have lowered their break-even prices to $30/barrel or less, while dated Brent crude has been twice that for some time, and above $70 and even on occasion $80/barrel lately.
The OGA said it had made available "huge areas" for licencing: a total of 26,659 km². It said if the offers are taken up, the additional area under licence will be an increase of 50% on existing acreage held. The new work programme commitments include eight firm exploration/appraisal wells, nine firm new-shoot 3D seismic surveys and 14 licences progressing straight to field development planning (second term licences).
Among the winners was Norway's Equinor (formerly Statoil); it won nine licences, of which it will operate eight. It said: "This strengthens our position as an ambitious UK explorer. We believe the UKCS is underexplored and anticipate that there are new discoveries yet to be made that can add value to our business and provide resources for new developments. We have drilled several exploration wells on the UKCS over the last few years, and this award puts us in a position to further develop our portfolio and utilise our strengths in a mature but prolific basin."
Another winner is private-equity backed Siccar Point, which won seven blocks, including one that adds to its already extensive acreage position in the Greater Cambo Area in the West of Shetland. It is ideally suited to provide satellite tie-in development opportunities to the Cambo field development, Siccar said. It includes the Tornado gas discovery as well as multiple exploration prospects. Six were won in partnership with Anglo-Dutch Shell and the seventh it won alone.
Siccar Point CEO Jonathan Roger said: “The latest award in the 3oth licensing round further enhances our growing portfolio and underlines our ambitions to take an active role in developing the West of Shetland area. Our partnership with Shell strengthens the expertise we are bringing to realising the potential of this exciting basin.”
OGA said the round may help to unlock around a dozen undeveloped discoveries containing a central estimate of 320mn barrels of oil equivalent (boe) of resource in undeveloped oil and gas discoveries which were previously stranded but can now be progressed through further appraisal to field development.
Consultants Wood Mackenzie believes the UK has around 1.5bn barrels of oil equivalent (boe) of resource in discoveries considered too small or technically challenging. The 30th round alone effectively provides line of sight to the progression of a fifth of these untapped reserves. Another 3.6bn boe (mean-risked volume potential) of exploration prospectivity will be progressed by the new licensees, OGA said.
OGA CEO Andy Samuel said the results showed that the "UKCS is back. Big questions facing the basin have been answered in this round. Exploration is very much alive with lots of prospects generated and new wells to be drilled. The results show a great diversity of active players from super-majors to new entrants, and the hard work promoting undeveloped discoveries is starting to pay off. I’m looking to industry to rapidly press ahead with these activities and maximise recovery from these great opportunities."
The OGA provided a number of incentives to support the round and stimulate interest, including: the new, flexible Innovate Licence; an extended 120-day application period; technology forum held in conjunction the Oil and Gas Technology Centre; and a suite of new data and analyses, including digital maps, prospect and discovery reports, plus well and seismic data.
The OGA said it was "particularly pleasing to see many companies identifying new prospects through the application of the latest seismic processing technologies and modern 3D surveys. We believe that the basin will continue to be renewed in the years to come, and look forward to working with the new licence holders to progress their resources into near-term production.”
Offshore lobby group Oil & Gas UK said the number of companies bidding was "another vote of confidence in exploring for oil and gas on the UK Continental Shelf. We now need these opportunities to be pursued with a sense of urgency to help unlock activity for our hard-pressed supply chain and ensure we start to mitigate the potential drop off in production post 2020."
The Oil & Gas Technology Centre said the results were "very promising" and it looked forward to "working with the successful applicants to help unlock the potential of the undeveloped discoveries, and use the learnings to drive international growth and export opportunities.”
The next round is expected to be launched this summer, and will offer high-impact exploration opportunities in under-explored and frontier areas of the UKCS. The OGA has already released almost 19,000 km of newly-acquired broadband seismic data free to download, and about 23,000 km of reprocessed legacy seismic data and well data packages.
The round will cover large areas including the East Shetland Platform, North West Scotland, South West Britain and the Mid North Sea High. The seismic data are accompanied by new geotechnical studies commissioned by the OGA to investigate the key subsurface uncertainties in these areas.