North Sea industry is ‘black in business’ as 60 companies win new exploration licences to drill for more than 300m barrels of new oil

BACK IN THE BLACK! Regulator hails 'transformational' North Sea oil and gas licensing round for new exploration
BACK IN THE BLACK! Regulator hails ‘transformational’ North Sea oil and gas licensing round for new exploration

The oil and gas regulator has declared that the North Sea industry is “very much alive” after it awarded 123 offshore drilling licences to a total of 61 oil exploration companies.

Fourteen of these new licences will now move straight in to their field development planning stage.

In its 30th offshore licensing round, the Aberdeen-based Oil and Gas Authority (OGA) granted exploration licences over 229 ‘blocks’ or ‘part-blocks’ across the North Sea.

These new licences provide a strong platform for future exploration and production across the North Sea and can help transform exploration activity levels.

Awards have been offered to a broad spectrum of companies: some super-majors are expanding their footprint while new players have been attracted to invest in the basin for the first time, with capital investment coming from an equally diverse array of sources.

In response to strong interest, the OGA has made available huge areas of acreage; a total of 26,659 km2 has been offered for award and if the offers are taken up, the additional area under licence will be an increase of 50% on existing acreage held.

The OGA expects this round to lead very quickly to activity, providing a welcome boost to exploration. 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). 

The round may help to unlock around a dozen undeveloped discoveries containing a central estimate of 320 million 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.

The North Sea currently has around 1.5 billion boe (source: Woodmac) in potentially commercial undeveloped discoveries, many of which were previously considered to be too small or technically challenging.

The 30th round alone effectively provides line of sight to the progression of 20% of these untapped reserves.

In addition, using industry’s resource estimates, around 3.6 billion boe (mean-risked volume potential) of exploration prospectivity will be progressed by the new licensees.

 Dr Andy Samuel
Dr Andy Samuel

Dr Andy Samuel, OGA chief executive said: ‘The North Sea is back.

“Big questions facing the basin have been answered in this round – but 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.

“Together we are building on the good momentum and collective efforts of industry, OGA and government over the last three years, with four projects already sanctioned this year and a healthy pipeline of 50 projects under consideration.”

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 forums 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. 

Gunther Newcombe, OGA Operations Director, said: “Following  a period of low exploration activity, support from the OGA and government has helped kick-off a revival in activity, as demonstrated by industry’s renewed interest through this licence round.

“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.”

Gunther Newcombe
Gunther Newcombe

A spokesman for the Oil & Gas  trade association said: “This demonstrates another vote of confidence in exploring for oil and gas in the North Sea.

“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.

Chris Pearson, Small Pools Solution Centre Manager at the Scottish Oil & Gas Technology Centre, added: “The outcome of the 30th Licensing Round is very promising.

“We look 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.”

Industry attention will now turn to the 31st Licensing Round, scheduled to be launched in summer 2018.

This round will cover large, ‘frontier’ oil areas including the East Shetland Platform, North West Scotland and Mid North Sea High.

OGA 30th licensing round North Sea summary
OGA 30th licensing round North Sea summary

Kevin Swann, from energy consultants Wood Mackenzie, commented the latest licensing round appeared to have been “a great success”.

He said: “The North Sea is in desperate need of new projects to fill a development pipeline that is all but empty beyond the early 2020s, and 14 new final-investment decision projects could go a long way to rectifying that.

“The eight firm exploration wells among the awards, with big companies like Shell, BP, Equinor and ConocoPhillips among those set to drill, is a big vote of confidence in the UK.

“It shows the big players are not ready to leave UK waters yet.

“Newer kids on the block, like private equity-backed Chrysaor and small E&Ps (exploration and production companies) IOG and i3, have committed to new exploration wells too, showing that UK exploration interest is strong across the corporate landscape.”

24 May 2018

 

 

 

 

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