UK’s 30th Offshore Licence Round focused on marginals
The UK’s 30th Offshore Licensing Round is strongly focused on developing marginal/small pool fields in the UK Continental Shelf (UKCS) and has attracted new players as well as established operators. The Oil and Gas Authority (OGA) offered 123 licences over 229 blocks or part-blocks to 61 companies for future exploration and production (E&P) across the UKCS.
The latest round, announced in May, attracted ‘strong interest’ and the OGA has made available ‘huge’ areas of acreage, with a total of 26,659km2. Indeed, if the offers are taken up, the additional area under licence will be an increase of 50% on existing acreage held.
The OGA said in a launch statement that it ‘expects this round to lead very quickly to activity’, following a slackening of E&P activity in recent years due to the low oil price previously. The new work programme commitments include eight firm exploration/appraisal wells, nine new shoot 3D seismic surveys and 14 licences progressing straight to field development planning (second-term licences).
Given the express drive to maximise economic return from UKCS development, the latest round is anticipated to unlock a dozen undeveloped discoveries containing a central estimate of 320mn boe of resource in undeveloped oil and gas discoveries, which were previously stranded but can now be progressed through further appraisal to field development.
Market analyst Wood Mackenzie estimates that the UKCS currently has around 1.5bn boe of resource in potentially commercial undeveloped discoveries. Many of these reservoirs were previously considered too small or technically challenging, due to high pressure, high temperature, high sulphur or other issues. However, developments of marginal fields, often called ‘small pools’, is now considered viable with potential tie-back or extended reach to existing infrastructure – floating, fixed or subsea. The 30th round effectively provides line-of-sight to 20% of these untapped reserves, says the OGA. In addition, there are industry resource estimates which forecast that 3.6bn boe of exploration prospectivity will be progressed by the new licensees.
Licence round awards have been offered to a broad spectrum of companies, including some super-majors who are expanding their footprint and new entrants who have been attracted to invest in the UKCS for the first time.
Andy Samuel, Chief Executive at the OGA, claimed: ‘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… I’m looking to industry to rapidly press ahead with these activities and maximise recovery from these great opportunities.’
Four projects are already sanctioned and there is a ‘healthy pipeline’ of 50 projects under consideration, he said.
To support and stimulate interest, the OGA has introduced a new, flexible ‘Innovate Licence’; an extended 120-day application period; a technology forum in conjunction with the Oil and Gas Technology Centre (OGTC), to encourage development of small pools containing less than 50mn boe; and a suite of new data and analyses, including digital maps, prospect and discovery reports, plus well and seismic data.
‘It’s great to see so many companies submitting applications as this demonstrates another vote of confidence in exploring for oil and gas on the UK CS,’ remarked Deirdre Michie, Chief Executive of Oil & Gas UK. ‘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 Centre Manager, OGTC, was also enthusiastic about the outcome of the 30th Licencing Round and said: ‘This [round] is very promising and we are focused on significantly reducing the life-cycle cost of field developments across the UKCS, aided by the development and deployment of new technologies.’
New players include Azinor Catalyst, backed by the Seacrest Capital Group, which was awarded two licences in the latest round, located in the Outer Moray Firth, central North Sea. Faroe Petroleum was awarded a new prospective exploration licence in block 30/14b, the Edinburgh prospect, which straddles the UK/Norway border in the central North Sea.
Zennor Petroleum announced that its subsidiaries Zennor Pathway and Zennor North Sea were offered five operation awards in and around its Finlaggan field onto previously unlicensed acreage, in addition to a discovery named Leverett, which may form a potential tie-back to the Finlaggan infrastructure. Development drilling Finlaggan is set to commence in 3Q2018. Zennor was also offered several non-operated awards in the central North Sea.
Siccar Point Energy secured additional strategic acreage for exploration and appraisal, adding to its extensive acreage in the Great Cambo Area, west of Shetland.
Attention will now turn to the 31st Licensing Round, scheduled to be launched in summer 2018, which will provide potentially high-impact opportunities in under-explored and frontier areas of the UKCS. This round will cover areas including the East of Shetland Platform, North West Scotland, South West Britain and the mid-North Sea High.
For more on North Sea and UKCS developments, including small pools, see the forthcoming August issue of Petroleum Review.