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North Sea Oil & Gas Review

North Sea Oil & Gas Review

By Tsvetana Paraskova

 

Energy transition plans, industry reports, and several company contracts and updates were the highlights in the UK oil, gas, and energy industry between the middle of January and mid-February. 

Roadmap 2035: 

OGUK, the leading representative body of the UK offshore industry, outlined its transition plans at the end of January. 

“The facts are that the climate is changing, and we must all change if we are to protect our planet for future generations. It will require constructive, collective and coordinated action to decarbonise a largely fossil fuel-based society which has, in relatively few years, helped to dramatically improve the living standards, health outcomes and quality of life that many of us so freely enjoy today,” OGUK Chief Executive Deirdre Michie told an audience of politicians, policymakers, and campaign groups in Edinburgh.

OGUK pledged that the UK offshore would be a net-zero oil and gas basin by 2050 in terms of domestic production emissions. The association will aim to reduce emissions from 14 million tonnes – currently 3% of the UK’s total greenhouse gas emissions – to 0.5 mt – in line with the Climate Change Committee outlook. 

“It will require significant investment, new technology and close working with the renewables sector in Scotland and across the UK,” Michie noted.

Carbon Capture Utilisation and Storage (CCUS) and hydrogen are two of the opportunities on the path to achieving net-zero emissions, the offshore association says.

UKCS Mediation Pilot

The Oil and Gas Authority (OGA) launched on 3 February a year-long ‘UKCS Mediation Pilot’, aimed at testing the extent to which mediation can resolve individual disputes between oil and gas licensees, operators, and infrastructure owners in the UK Continental Shelf. According to the OGA, disputes often arise because of entrenched licensee behaviours or communication breakdowns that could be time and resource-consuming for the companies involved in those disputes.  

Subsea UK Business Activity Review

In early February, Subsea UK launched it's Business Activity Review 2019 which showed that the total value of UK subsea output rose to nearly £7.8 billion in 2019 fiscal year from £7.5 billion in 2017. Over the past two years, employment has remained relatively unchanged at around a 45,000 workforce, but Subsea UK expects employment in the industry to rise to over 54,000 by 2022 as nearly 80% of firms expect to recruit more staff in the future. 

“The findings in this report reveal that this decline has been arrested with a clear upturn in activity, largely due to an increase in output from subsea SMEs and more activity in renewables, particularly offshore wind,” Subsea UK said in its report. 

Carbon Storage Site Identification

A new study of the Heriot-Watt University will focus on identifying the best sites for potential carbon storage sites among the gas fields in the southern North Sea, to help the UK reach its net-zero target. The £1.4-million study to map the carbon storage potential received funding from the Oil and Gas Technology Centre (OGTC) and support from the OGA, offshore operators, and data owners. The southern North Sea is one of the most promising options for large-scale carbon capture and storage in the UK, Professor John Underhill from Heriot-Watt University says.  

The OGA called on decommissioning professionals to increase their usage of the OGA’s interactive Decommissioning Learning microsite to capture and promote late-life and decommissioning learnings. 

“It is so important that industry continues to share learnings and there are a huge number of examples where companies are working differently to save time and costs, so this microsite offers an excellent platform for promoting these examples,” Pauline Innes, Head of Decommissioning at the OGA, said on 13 February.   

New Offshore Wind Projects Galvanise Manufacturing.

On the same day, independent energy research and business intelligence company Rystad Energy published a new analysis, which found the global offshore wind projects that are set to start up this year will make 2020 the year with the highest ever use of steel jacket foundations for new developments, and this trend will be led by the UK. A total of 258 turbines which will be installed this year will have a jacket foundation, and a British project, ScottishPower Renewables’ East Anglia ONE, accounts for 102 such turbines, Rystad Energy’s analysis showed.  

“The higher share of jacket foundations follows the trend of offshore wind farms being placed in deeper waters in more mature regions. As shallow-water areas get more populated, countries that look to increase their offshore wind capacity must look to deeper waters,” said Alexander Flotre, Rystad Energy’s Vice President & Product Manager Offshore Wind. 

Oil & Gas

In company news and contracts, BP announced on 4 February first oil from Alligin field west of Shetland. Alligin, a 20-million barrels of oil equivalent field, was originally expected to produce 12,000 barrels gross of oil equivalent a day at peak. The project’s performance has been better than expected, however, reaching 15,000 barrels gross of oil equivalent a day at peak since start-up in late December, BP said. 

A week later, BP unveiled a net-zero aim to become a net-zero company by 2050 or sooner and halve the carbon intensity of the products it sells by 2050 or sooner. 

Prosafe said in its operational update in January that Safe Caledonia would begin a 162-day contract for Total at the Elgin complex in the UK North Sea in mid-April 2020, with one 30-day option. In addition, Safe Zephyrus will mobilise for the 80-day Shell Shearwater contract in the second quarter of 2020, with one 30-day option in the contract.

Servelec Controls said on 16 January that Centrica Storage had hired the company to help prepare Easington Terminal to process gas from Tolmount in the Southern North Sea, a new development which is set to extend the site’s lifespan by 10 to 15 years.

The Tolmount field development is expected to produce enough gas to supply around 2.5 million homes and is scheduled to come on stream in winter 2020. To facilitate the additional gas, modifications must be made to the Easington site and this will include an upgrade and rationalisation of the existing functional safety systems, Servelec Controls, a provider of safety and control systems, said. 

Egdon Resources said on 21 January it had signed a farm-in deal with Shell under which the supermajor will buy a 70% working interest in two licences in the North Sea, which contain the Resolution and Endeavour gas discoveries, respectively. Egdon currently holds 100% in the two licences. After buying 70% in each of them, Shell will be appointed licence operator, while Egdon will keep a 30% non-operated interest in both licences. 

Dana Petroleum has awarded Ocean Installer a contract for work at the Triton Area Development in the Central North Sea around 190 km east of Aberdeen. Under the contract, Ocean Installer will work on the installation and trenching of a Flexible Production Flowline at the Guillemot field, with offshore operations scheduled for Q2 2020, Ocean Installer said on 22 January. 

Jersey Oil & Gas plc has signed a conditional agreement to buy operatorship of and an additional 70% working interest in Licence P2170 from Equinor UK. The consideration for the acquisition consists of two milestone payments and a royalty based on potential future oil volumes produced from the Verbier field, Jersey Oil & Gas said on 27 January.  

Vroon Offshore Services announced on the same day that platform-support vessel (PSV) VOS Prelude had been chartered to Eni UK Limited to support a plug and abandonment/decommissioning campaign in the southern North Sea. The VOS Prelude is fixed for 31 months firm, with further options if required, and will operate out of the port of Great Yarmouth. 

Neptune Energy announced on 28 January plans for a digital subsurface programme, aimed at discovering hydrocarbons 70% faster, reducing exploration costs, and bringing discoveries into production up to three years earlier than current industry standards permit. 

Offshore engineering solutions provider Aquaterra Energy has signed a Memorandum of Understanding (MoU) with Oceaneering International Services to cooperate in offering complete decommissioning and late-life solution packages to the North Sea oil and gas industry. The companies will offer tooling and services in four areas: platform well abandonment, subsea well abandonment, topside and jacket removals, and subsea removals.

Serica Energy said on 30 January that the Bruce, Keith, and Rhum fields were temporarily shut down and would not produce for around 2 months, due to engineering work to ensure that a caisson, which had parted below the water line, is properly secured. 

The consortium PBS was awarded on 30 January a contract to deliver General Maintenance & Operations Support services to Total Exploration & Production assets in the North Sea. Under the terms of the five-year contract, PBS (Ponticelli, Brand, and Semco) will manage asset integrity, maintenance and reliability, fabric maintenance, shutdowns and modification projects for all of Total UK’s operated assets, which currently produce over 250,000 barrels of oil equivalent per day.

Commercials, Contracts, M&A

Ithaca Energy said in its operations update on 3 February that it was exploring potential options to optimise its capital structure, including a potential initial public offering (IPO). Ithaca also plans the sanction of the Phase II Captain enhanced oil recovery (EOR) investment programme for the first half of the year.  

Ithaca Energy and a global investment company have signed a non-binding letter of intent to set up a new infrastructure company that would be held 40% by Ithaca and 60% by the investment company, Ithaca’s parent Delek Group said on 9 February. If the non-binding LOI leads to forming a new company, the new firm will buy part of Ithaca’s production facilities from Ithaca as part of a sale and charter agreement. 

EnQuest expects its 2020 production at between 61,000 and 68,000 boepd, down from the 2019 output, due to shutdowns at the Thistle and Heather fields, expected to be partially offset by new wells drilled at Magnus and Kraken, the company said in an operations update on 4 February.

RockRose Energy has signed a deal to buy the Cotton gas field in the UK Southern North Sea from Speedwell Energy. The Cotton field is located 100 km east of Scarborough between the Kilmar and Garrow fields in both of which RockRose holds 15%.

“This acquisition gives RockRose the option of a significant amount of production and reserves in an area of the Southern North Sea Gas Basin in which we already have other producing assets. We look forward to carrying out further evaluation of the discovery prior to committing to FID,” said RockRose’s Executive Chairman Andrew Austin. 

Subsea systems technology specialist Interventek announced on 5 February an award of a multi-million-pound contract to supply three 7.375” 10,000psi in-riser landing string completion systems for an international OEM client. Interventek has won contracts worth over £10 million over the last twelve months, and has relocated to larger premises in Aberdeen, to better service the growing demand for its specialist Revolution valve technology. 

Longboat Energy, the new company set up by the former management team of Faroe Petroleum, targets an initial acquisition to deliver near-term cash flow. The initial targets are expected to be located offshore Norway, the UK, or the wider EEA region, and to be producing or nearing production to provide cash flows to fund organic growth in a low oil price environment, Longboat Energy said on 6 February. 

Thailand-based offshore services provider Mermaid Maritime said it incorporated an indirect wholly-owned subsidiary, Mermaid Subsea Services (UK) Limited, in the UK on 7 February. Mermaid Maritime will use the new company as a vehicle to expand its subsea and related services into the North Sea sector.   

Mocean Energy, Chrysaor, subsea energy storage experts EC-OG, and AUV specialist Modus have teamed up to look at the potential of using renewables for subsea power. The project is funded by the partners together with the Oil and Gas Technology Centre (OGTC), and will look to use Mocean Energy’s Blue Star wave energy converter and EC-OG’s HALO subsea energy storage system to power subsea tiebacks or residential AUVs. 

Premier Oil’s creditors approved on 12 February the proposed acquisition of North Sea assets from BP. In early January, BP agreed to sell its interests in the Andrew area in the central UK North Sea and its non-operating interest in the Shearwater field to Premier Oil for US$625 million. 

i3 Energy plc said on 13 February it was making good progress in its farm-out process to fund a 2020 appraisal drilling program in Blocks 13/23c in the UK North Sea. The data room is now open and companies are actively evaluating the opportunity, said the company, which also plans to list its shares on a secondary exchange. The listing is not being done in preparation for an imminent equity placing as indicated by market talk, i3 Energy noted.

Well-Safe Solutions announced on 13 February the award of work to Schlumberger for the provision of Plug and Abandonment Well Services. Schlumberger will supply cementing service, wireline services, wellbore fluid services and fishing, milling and swarf recovery services.

Published: 07-03-2020

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