Opportunities for a green recovery, the prospects of the UK oil and gas industry in the energy transition, new strategies from the biggest UK-based oil firm, and a number of deals in the North Sea were the highlights in the energy sector this past month.
According to the Just Transition Commission Advice for a Green Recovery in Scotland, a large-scale decommissioning programme could drive critical activity in the North Sea, maintain essential skills, and position the North Sea infrastructure for a new integrated future.
“There is a need to create jobs in the short-term that will allow us to retain this workforce and the associated supply chains, so that they can be redirected towards our net-zero transition,” the commission said in its report.
“Focusing in particular on plugging and abandonment activity (where much of the value in decommissioning lies) would result in the creation of immediate jobs throughout the whole supply chain,” according to the advice.
Commenting on the report, OGUK Chief Executive Deirdre Michie said:
“We have a once in a lifetime opportunity to show how we as an oil and gas producing country can successfully build a more diverse and lower carbon energy mix in a way that embraces the skills and talents of our people and our indigenous industries.”
The Oil and Gas Authority (OGA) has published several reports about the UK offshore industry over the past weeks.
The 2019 Production Efficiency report showed production efficiency on the UK Continental Shelf (UKCS) had improved for the seventh consecutive year to reach 80% for 2019, three years ahead of the 2022 target. Production efficiency showed an impressive five percentage point increase over 2018 and reveals that every region of the UKCS reported a rise, except West of Shetland which saw no change.
The increase was driven by a 25% reduction in production losses, following concerted effort by the industry, the OGA said.
“The twin challenges of Covid-19 and the fall in commodity price have placed the industry under pressure, but operators’ long-term improvement in production efficiency leaves them in a better position,” Hedvig Ljungerud, OGA Director of Strategy, said.
The integration of offshore energy systems, including oil and gas, renewables, hydrogen, and carbon capture and storage (CCS), could contribute to deliver around 30% of the UK’s total carbon reduction requirements needed to meet the 2050 net zero target, the OGA said in the Energy Integration Project report in early August.
The OGA’s latest annual UKCS Decommissioning Cost Estimate 2020 found that estimated decommissioning costs have, to date, reduced by 19% since the OGA began benchmarking in 2017. The estimate also found that that there remain considerable opportunities for future cost reductions which are necessary to meet the UKCS cost reduction target of greater than 35%, to levels below £39 billion.
OGUK has launched a new SME forum to support smaller businesses under pressure and provide an opportunity to identify and address issues.
“The new forum will deliver a platform to share and engage, as well as showcase the work OGUK is doing to support smaller businesses and stimulate a recovery. This will give our members the chance to keep their finger on the pulse and offer solutions to challenges industry is facing,” said Emily Taylor, OGUK’s continuous improvement manager.
In company news, bp halved its dividend as it reported a loss of the second quarter, a move that was expected by energy analysts.
Along with the Q2 results, bp unveiled its new strategy as it aims to reinvent itself from an International Oil Company (IOC) to an Integrated Energy Company (IEC). Within a decade, bp plans to boost its low-carbon investment tenfold to around US$5 billion a year and reduce oil and gas production by 40% with no exploration in new countries.
The company also plans to cut emissions from operations by 30-35% by 2030, and reduce the carbon intensity of the products it sells by more than 15%.
“All of this means we aim to be a very different company by 2030. And that’s what the world needs. The next decade is critical in the fight against climate change,” bp’s chief executive officer Bernard Looney said.
Commenting on bp’s new strategy, Luke Parker, Wood Mackenzie Vice President - Corporate Analysis, said:
“Today’s strategy update marked a big step forward, filling in many of the blanks, including detailed guidance to 2030. It leaves stakeholders with a much clearer idea of where BP is headed over the next decade, how it will get there and what that means for the value proposition.”
Shell posted adjusted earnings for the second quarter, thanks to very strong crude and oil products trading. The group, however, incurred an impairment charge of US$16.8 billion post-tax, after it revised down its medium- and long-term price and refining margin outlook assumptions in response to the pandemic and macroeconomic conditions, as well as energy market demand and supply fundamentals.
France’s Total announced two deals in the UK. At the end of July, Total signed an agreement to sell the Lindsey refinery in Lincolnshire in England, and its associated logistic assets, as well as all of the related rights and obligations, to the Prax Group. In early August, Total closed the sale of non-core UK North Sea assets to NEO Energy, after the regulatory approvals and the agreement of partners were obtained.
Hurricane Energy warned in early August that an ongoing technical review of the Lancaster field could lead to a material downgrade to estimated reserves attributable to the Lancaster Early Production System, and that there could also be a material downgrade to estimated contingent resources across the West of Shetland portfolio. The technical review is expected to be completed by 11 September 2020.
Spirit Energy said that its gas field York, off the North East Yorkshire coastline in the Southern North Sea, has been given another three years of life with an additional £13 million investment. The York field, which achieved first gas in 2013, was first expected to cease production this year. Thanks to the York Life Extension Project, aimed at maximising economic recovery of the field, the production life will extend until 2023/24 and tap into an additional 18 billion cubic feet of gas.
Petrofac was awarded at the end of July a two-year contract with NEO Energy to provide Well Management and Well Operator support for 25 production wells across the Affleck, Balloch, Dumbarton, Flyndre, and Lochranza fields. The contract also positions Petrofac to support future well construction and intervention campaigns.
“This award builds on our existing track record for delivering Well Operator services for clients in the UKCS, bringing the size of our well portfolio in the basin to 50,” said Nick Shorten, Managing Director for Petrofac Engineering and Production Services in the Western Hemisphere.
Norway’s Equinor has agreed to sell a 40.8% interest in and transfer operatorship of the Bressay oil field development on the UKCS to EnQuest. Following completion of the transaction, EnQuest will have a 40.8125% interest and operatorship, Equinor will have another 40.8125%, and Chrysaor will retain an 18.375% interest.
Independent Oil and Gas plc awarded in early August the Engineering, Procurement, Construction and Installation (EPCI) contract for its Core Project Phase 1 platforms to Dutch contractor HSM Offshore BV. The contract comprises the design, engineering, fabrication, and installation (including assistance to hook-up and commission) of both normally unmanned installation (NUI) production platforms for the IOG-operated Southwark and Blythe gas fields in the UK Southern North Sea.
Deltic Energy Plc announced a material increase in the estimated volume of gas compared to previous estimates as well as a significant increase in the chance of success in relation to the Selene prospect.
“The significantly increased gas volumes and decreased risk profile further cements the importance of Selene as one of the largest undrilled Leman Sandstone structures in this mature play,” said Deltic CEO Graham Swindells.
Neptune Energy announced a partnership with 3D technology specialist Eserv as part of the ongoing digitalisation of Neptune’s assets, including its operated Cygnus gas platform in the UK Southern North Sea. Using 3D and Artificial Intelligence (AI) technologies, a digital map of all three bridge-linked jackets was captured, enabling Neptune Energy to detect asset integrity issues early and plan fabric maintenance work on Cygnus.
Read the latest issue of the OGV Energy magazine HERE.
Planes, Trains & Automobiles (and Oil & Gas too)
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J+S with their Legacy Locker: a circular Economy approach to the decommissioning model
Proteus: How to use technology to stay agile in the changing business environment