CNOOC announces 'largest UK gas discovery since 2008'
The Chinese national oil and gas company CNOOC recently announced a new discovery on the Glengorm prospect, located in the UK Central North Sea.
The Glengorm discovery, located in Licence P2215 with a water depth of approximately 86 metres, was drilled to a total depth of 5,056 metres and encountered net gas and condensate pay zones with a total thickness of 37.6 metres. CNOOC holds a 50% stake in, and is operator of, Licence P2215, with Total E&P UK North Sea and Euroil holding 25% each.
‘At 250mn boe, Glengorm is the largest gas discovery in the UK since Culzean in 2008,’ says Kevin Swann, a senior analyst with Wood Mackenzie’s North Sea upstream team. He adds: ‘There is a lot of hype around frontier areas like West of Shetland, where Total discovered the Glendronach field last year. But Glengorm is in the Central North Sea and shows there is still life in some of the more mature UK waters.’
The gas at Glengorm is subject to very high pressures and temperatures (HP/HT), which makes it more challenging and costly to develop. Although it was first mapped as a prospect around 20 years ago, these difficulties mean that it has only now been successfully drilled – technical problems led to two failed drilling attempts in 2017. However, there are other HP/HT fields in the vicinity, such as Elgin/Franklin and Culzean, which could be used as tie-back hosts to mitigate some of these challenges.
According to Swann, the discovery may hail what could prove to be a ‘pivotal year for UK exploration, with several high impact wells in the plan.’
Dr Andrew Latham, Vice President of Global Exploration at Wood Mackenzie, notes: ‘[Global] exploration industry returns averaging 13% in 2018 were the highest in over a decade, driven by lower costs and a focus on drilling prospects with a straightforward route to commercialisation in the event of success. Glengorm fits this revitalised exploration model perfectly. It looks to be a valuable discovery that should help sustain the industry’s profitability into 2019.’ He adds: ‘This underlines the considerable potential of the UK Continental Shelf (UKCS). Our official estimate is that there still remains between 10 and 20bn barrels plus to be recovered, so there is every chance of yet more significant finds, provided industry can increase exploration drilling and capitalise on the real value to be had here in the UK.’
According to the UK’s Oil and Gas Authority (OGA), the number of exploration wells being drilled in the UKCS has been in decline, with just seven wells being drilled in 2018 compared to 13 in 2014. However, despite fewer wells being drilled, the volume being discovered in the UK has (provisionally) more than doubled over the same period, from 83mn boe in 2014 to 175mn boe in 2017. Additionally, the costs associated with finding these volumes have dropped dramatically – from an average of $9/bin 2014 to just over $1/bin 2018. It also estimates that on the UKCS, around 43% of exploration wells drilled are potentially commercial, compared with the global average of around 36%.
With the industry now acquiring three times as much seismic data in 2018 on the UKCS, compared to the previous two years, the OGA expects a healthier exploration outlook, forecasting an upturn in drilling activity, with around 18 exploration wells and 19 appraisal wells potentially to be drilled across the basin this year.
The OGA’s Head of Exploration and New Ventures, Dr Nick Richardson, notes: “The North Sea has proven once again that it is a world-class petroleum basin, and its exploration history is a long way from being over. Those companies that have a bullish attitude and have kept the faith in the UK’s oil and gas sector’s fundamentals will continue to reap the rewards that others have missed. If industry can intensify its exploration activity by maturing prospects through sound technical evaluations to active drilling, whilst maintaining the UK’s now world-class technical success rates and low finding costs, it will deliver increased value from the significant remaining potential in the basin.’