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UK North Sea Oil & Gas Review

UK North Sea Oil & Gas Review

 

As usual a lot of newsworthy events took place in the UK North Sea in the month between mid-March and the middle of April.

A major industry association issued its annual report on the UK oil and gas industry and supply chain, exploration and production (E&P) companies issued updates on oil and gas field developments, and contractors announced new deals for supporting oil and gas operations in the UK North Sea.

At the end of March, Oil & Gas UK launched its flagship Business Outlook 2019 report, which revealed that some £200 billion will need to be spent to find, develop, and operate reserves to add a generation of productive life to the basin, providing significant opportunities for both supply chain and E&P companies. According to the report, production in the UKCS increased in 2018 compared to 2017, exploration activity is showing signs of revival, and revenues of the supply chain appear to have stabilised and potentially are on track to rise this year for the first time since the oil price crash of 2014.

Total production from the UKCS last year averaged 1.7 million barrels of oil equivalent per day (boepd), up by 4 percent compared to 2017, meaning that production has now increased by 20 percent over the past five years, OGUK’s report found.

In addition, exploration activity is picking up pace, and up to 15 exploration wells are expected to be drilled this year, including several potentially high-impact prospects, the association said.

In 2018, more new projects on the UKCS were approved than in the previous three years combined, unlocking over £3.3 billion of new capital investment and more than 400 million boe of new reserves, the report says, expecting a similar number for this year as well.

Thanks to increased operational investment and new capital approvals, revenues of the UK oil and gas supply chain are expected to stabilise, but some areas of the supply chain are still under pressure, according to the report.

“Our Business Outlook Report 2019 shows that industry’s approach during the downturn is delivering results. Following 14 years of decline, production has increased by a fifth over the past five years. Cost improvements are being sustained and there is building momentum around exploration, with more new opportunities being drilled and the largest two conventional discoveries for a decade made in the second half of 2018,” OGUK Chief Executive Deirdre Michie said, commenting on the report.

“However, challenges remain across parts of the supply chain, with revenues and margins still under pressure and cash flow stretched. If capabilities and resources are to stay anchored here in the UK, there must be a competitive proposition for supply chain companies to invest in too,” Michie noted.

OGUK is set to release the Skills Landscape report in Aberdeen on 2 May. The report will outline the UK oil and gas sector’s skill requirements through 2025, as part of the UKCS Workforce Dynamics series produced by industry skills body OPITO in conjunction with the Robert Gordon University Oil and Gas Institute.

The Oil and Gas Authority (OGA) said in March that it would launch a project looking to advance collaboration with renewables to explore a mix of energy sources and storage solutions needed for the transition to a low carbon economy.

A few days later, OGA launched on 25 March what is believed to be one of the largest ever single open releases of data with the launch of the UK’s first UK Oil and Gas National Data Repository (NDR).

“The platform makes data available for machine learning and artificial intelligence and offers the opportunity to uncover new prospects and previously overlooked plays,” said Nic Granger, Director of Corporate at OGA.

In early April, OGA released regional maps and supporting data for the Mid North Sea High area.

In field developments and discoveries in the UK North Sea, Rystad Energy said on 8 April that the Glengorm discovery made in January was one of the top 15 conventional discoveries in the first quarter this year.

A week before that, Rystad Energy’s Oil Markets team warned that the Forties Blend production is expected to drop in July and August, due to field maintenance at Buzzard and other Forties feeding field.

“The Buzzard field off the coast of Scotland is the second largest North Sea oil field in terms of current production after Troll. Buzzard is said to have outsized importance in setting the oil price, as it contributes around 30% to Forties Blend, one of five crude streams underpinning the Dated Brent benchmark,” Rystad Energy notes.

Moving to news from companies about field developments, contracts, and corporate transactions, we start with Siccar Point Energy which said on 19 March that it had begun its 2019 drilling campaign with the spudding of an exploration well at the Blackrock prospect, 140 km north-west of Shetland.

On the same day, UK-based oil and gas company Hurricane Energy plc updated the market on the Early Production System development of the Lancaster field. The Aoka Mizu FPSO successfully hooked-up to the turret mooring system buoy at the Lancaster field on 19 March, the company said, noting that work to achieve first oil continues.

On 20 March, Survitec said that it had secured a three-year contract extension with Petrofac to supply aviation immersion suits and lifejackets for personnel making helicopter transits to offshore oil platforms from Norwich Airport.

Global Energy Group (GEG) announced on the same day that it had combined the brownfield engineering capability of Apollo with the capability of GEG’s Integrity and Construction (ICON) division, a brownfield modification and construction provider in the North Sea. The combined business forms an integrated EPC contractor in the UK, named Global Engineering and Construction (Global E&C).

EnQuest provided an outlook for 2019 on 21 March, expecting production to grow by around 20 percent to between 63,000 and 70,000 boepd, primarily driven by the Magnus field.

On 28 March, Neptune Energy and its joint venture partners BP and Japex announced the final investment decision for the Seagull oil project in the UK North Sea. Seagull is expected to initially produce around 50,000 boepd, 80 percent of which oil, across its 10-year design life. Proved plus probable gross reserves are estimated at 50 million barrels of oil equivalent.

Oil & Gas UK welcomed the Seagull project FID, with Mike Tholen, Oil & Gas UK’s Upstream Policy Director, commenting:

“Neptune’s Seagull project signals the basin’s first FID of 2019 and demonstrates a growing appetite among North Sea players to establish a diversified portfolio making the most of the variety of opportunities the basin offers.”

On the same day, Cyberhawk Innovations Limited, which delivers drone inspections and asset visualisation software for the energy infrastructure, said that it had been acquired by funds advised by Magnesium Capital LLP.

Subsea 7 announced on 29 March that Shell had awarded it a contract worth between US$100 million and US$200 million for the Arran gas field development 150 miles east of Aberdeen. The contract includes project management, engineering, procurement, construction, and installation of 60 km of mechanically lined pipe-in-pipe production flowline, together with subsea structures and tie-ins at the Arran and Columbus gas condensate fields and the Shearwater platform.

Decipher Production Limited announced in April first oil from the Orlando field.

Petrofac said on April 2 that it had been appointed Well Operator by Tullow Oil for the next phase of its Thames Decommissioning Project, in a contract worth around US$16 million.

On the same day, Neptune Energy announced it had entered into a global Alliance Agreement with TechnipFMC for delivering subsea projects.

In early April came two disappointing drilling results for wells in the UK North Sea. Jersey Oil & Gas said that a well drilled at Verbier did not encounter Upper Jurassic sands as anticipated, and as a result, the resource estimate for the Verbier discovery is likely to be revised towards the lower end of the initial resource estimate of 25 million barrels of oil equivalent.

On 15 April, Jersey Oil & Gas said that Verbier’s operator Equinor had confirmed to co-venturers that it would complete the already planned full re-evaluation of the licence area.

“The appraisal well results were disappointing for us all, however we believe there is still plenty to play for in terms of both the Verbier discovery and in the remainder of our acreage and we look forward to receiving the new fully processed 3D seismic to help us de-risk the licence further,” said Jersey Oil & Gas CEO Andrew Benitz.

Serica Energy announced that an exploration well at the Rowallan prospect, operated by Eni, found no hydrocarbon bearing.

Belgium-based NHV Group announced on 4 April a new long-term contract with Premier Oil to provide helicopter services to their North Sea assets.

Kishorn Port Ltd said it had secured a Waste Management Licence (WML) from the Scottish Environment Protection Agency (SEPA) for the decommissioning of off-shore oil and gas assets at Kishorn Yard and Dry Dock.

Zennor Petroleum announced that results from both production wells at the Finlaggan field in the UK Central North Sea “have been very encouraging.”

On 9 April, Well-Safe Solutions said that it had agreed to buy the Ocean Guardian semi-submersible drilling unit, which will be upgraded and renamed the ‘Well-Safe Guardian’ after converting the asset into a bespoke plug and abandonment (P&A) unit, with investment of around US$100 million.

In another P&A news from the same day, HydraWell said it signed a contract with an undisclosed UK-based supermajor to provide equipment and personnel for P&A services in the UK North Sea.

i3 Energy plc said on 9 April it had contracted the Borgland Dolphin semi-submersible drilling rig for a 94-day drilling programme due to start between 15 July and 15 August 2019.

Equinor UK Limited has exercised three of six one-month options to extend the Safe Boreas at the Mariner project to accommodate personnel working on Mariner in the hook up and early production phase through September 2019, Prosafe said on 10 April.

On the same day, news broke that Equinor would delay the start-up of the Mariner oil field from the first half of 2019 to some point in the third quarter of 2019, due to issues with the electrical couplings on the platform.

Independent completions service company Tendeka said on 11 April that it had more than doubled its work in the UK offshore sector over the past twelve months.

Shearwater GeoServices Holding AS said on the same day that it had been awarded a multi-project marine seismic 3D and 4D acquisition contract by Shell International Exploration & Production B.V. The contract covers four separate surveys, including 3D surveys on the Greeves and Blue Water fields in the UK North Sea.

DNV GL has secured a 3-year contract across Dana Petroleum’s operated assets in the UK North Sea. DNV GL has been working with Dana Petroleum since 2012 with the development of the Western Isles floating production storage and offloading (FPSO) vessel. The Triton FPSO has now been added to the existing project scope, “involving classification and verification services, primarily, validation on whether the safety and environmental critical elements (SECEs) are suitable and maintained in adequate condition to meet performance standards in compliance with the UK offshore safety case regulations,” the company said on 16 April.

Published: 25-04-2019
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