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UK North Sea Oil & Gas Review

UK North Sea Oil & Gas Review


Several key industry reports on resources, costs, and environment, and a lot of drilling activity updates and contracts dominated the news flow from the UK North Sea oil and gas sector this past month.   

The Oil and Gas Authority (OGA) published its annual UK Oil and Gas Reserves and Resources Report, which showed that the overall remaining recoverable reserves and resources on the UK Continental Shelf (UKCS) remain at a significant level ranging from 10 to 20 billion barrels plus of oil equivalent.

Last year, around 680 million boe (mmboe) were added to 2P reserves and about 600 mmboe were produced—leading to a reserve replacement ratio of 115%, the OGA has estimated.

The UK’s contingent resources are still significant, with a central estimate of discovered undeveloped resources of 7.5 billion boe. Much of this resource is in mature developed areas and under consideration for development.   

“The maturation of contingent resources presents a significant opportunity for the continued development of the UK’s petroleum resources. This will require substantial investment in both new field developments and incremental projects,” the OGA’s report says.  

The Authority also published its UKCS Decommissioning Cost Estimate 2019 report, showing that the 2019 'like-for-like' decommissioning cost estimate dropped by 17% to £49 billion comparing to the same inventory in 2017. The decommissioning costs reduction has been largely due to continued improvement in planning and execution practices, including costs for well plug and abandonment in the Northern North Sea (NNS) and Central North Sea (CNS), lowered platform running costs in the NNS, and lower platform and subsea infrastructure removals in the NNS and CNS, according to the report.

In July and early August, the OGA also offered for award 4 licences to 3 companies in the 31st  Supplementary Offshore Licensing Round focused on the Greater Buchan Area, and launched a restricted ‘Out of Round’ offer of two blocks around the Northern North Sea Rhum Field.

Westwood Global Energy Group published a new study in mid-July, saying that new entrant exploration and production companies are key to the future development and production from the UKCS; yet, the new E&P entrants need to boost investment in new oil and gas production. Since 2008, new entrants have increased their presence on the UKCS and now they control 46% of production, 39% of reserves, and 64% of potentially commercial volumes yet to be developed, according to Westwood Energy.

“The big deal values grab the headlines, but it is how new entrants balance reinvestment of cashflows from the assets they buy with paying dividends that will determine their lasting impact on the UKCS,” says Emma Cruickshank, Head of Northwest Europe at Westwood Energy.

The key industry association Oil & Gas UK (OGUK) published its 2019 Environment Report which evaluates performance across a range of areas including emissions, chemical discharge, waste disposal, and produced water, to the end of 2018. The key finding from the report is that CO2 emissions dropped by 3% in 2018 compared to 2017, while production rose by 4% at the same time.

“Operators are making changes to processes and equipment offshore to continually improve efficiency and emissions performance. Alongside this, OGUK is actively working with its members to understand solutions to meet our commitment to the UK’s net-zero ambition by 2050 and the expectations of society whilst maintaining sovereignty of supply,” Louise O’Hara Murray, OGUK’s Environment Manager, said, commenting on the findings of the report.  

In project, drilling, and deals updates, Hurricane Energy announced it spudded on 12 July the 205/26b-B well, Lincoln Crestal, using the Transocean Leader rig. Lincoln Crestal is the second in a three-well programme on Hurricane’s Lincoln and Warwick assets, the Greater Warwick Area.

Veolia UK said on 15 July that the Dales Voe decommissioning facility in Shetland received two new installations for decommissioning by strategic partners Veolia and Peterson, making a step closer to becoming a centre of excellence for recycling offshore structures from the North Sea.  

Premier Oil announced on 17 July that its next UK growth project, Tolmount in the Southern North Sea, was on schedule for first gas at the end of 2020. Drilling of the Tolmount East appraisal well, which has the potential to add significantly to the Tolmount resource, will begin soon, Premier Oil said.

Hibiscus Petroleum said on the same day that its wholly-owned subsidiary Anasuria Hibiscus UK Limited had entered into a conditional non-binding term sheet to buy blocks in the North Sea, 250 km northeast of Aberdeen, from United Oil & Gas PLC.  

Xodus Group announced an agreement to acquire Perth-based Green Light Environmental, as part of plans to expand its Asia Pacific (APAC) operations.

McDermott International said on 18 July it had relocated its Subsea Center of Excellence from Epsom in Surrey to London, following BP’s award of the Greater Tortue Ahmeyim Natural Gas Project offshore Mauritania and Senegal. “The relocation of our subsea office positions us well for the successful execution of recent project awards and enables us to expand our subsea offering to meet projected growth,” said Tareq Kawash, McDermott’s Senior Vice President for Europe, Africa, Russia and Caspian.

Maersk Drilling said on 21 July that its jack-up Maersk Resolute had been awarded a three-well contract with Perenco. The rig will move to the UK North Sea to work on the Wollaston and Ravenspurn fields, starting in October this year, Maersk Drilling added.  

Jersey Oil & Gas announced on 22 July it was awarded significant acreage containing over 100 million barrels of discovered oil, including the Buchan oil field, in the OGA’s 31st Supplementary Offshore Licensing Round.

“These awards are the kind of value-creating opportunities available to nimble independent companies operating in the North Sea today and stem from an intensive two-year work effort behind the scenes by JOG to prepare today's winning applications,” said Andrew Benitz, CEO of Jersey Oil & Gas.

Talon Petroleum also won a block in the 31st Supplementary Offshore Licensing Round, with a successful joint bid with ONE-Dyas for a licence over Block 14/30b.

TechnipFMC said it was awarded a significant integrated Engineering, Procurement, Construction and Installation contract from Neptune Energy for the Seagull project in the Central North Sea. For TechnipFMC, a 'significant' contract ranges between US$75 million and US$250 million.

Independent Oil and Gas PLC signed in July an agreement with Perenco UK Limited, Tullow Oil SK, and Spirit Energy Resources for the acquisition of the Thames Reception Facilities (TRF) at the Bacton Gas Terminal. A couple of days later, Independent Oil and Gas said it had entered into a comprehensive farm-out transaction with CalEnergy Resources Limited to farm out 50% of its Southern North Sea assets, comprising all of the  upstream assets except for the Harvey licences, as well as the Thames Pipeline and associated Thames Reception Facilities.

Privately-held oil and gas exploration company Soliton Resources Limited announced on 26 July the farm-out of UK Central North Sea Licence P2390 (Blocks 23/26e and 30/1d) to Equinor UK Limited, which will buy an 85% working interest in the licence and assume operatorship to undertake an initial work programme to improve the quality of existing 3D seismic data.  

On 30 July, Centrica said that it intended to exit oil and gas production as it is refocusing its portfolio on becoming an Energy Services and Solutions provider. Centrica expects to exit its interest in Spirit Energy by the end of 2020 via a trade sale.

“Today, we have announced our intention to exit oil and gas production. This will complete our shift towards the customer, as we focus on our distinctive strengths, with an emphasis on helping our customers transition to a lower carbon future,” departing Chief Executive Officer Iain Conn said in a statement.

On 31 July Prosafe said it had signed a contract with Total E&P UK Limited for the Safe Caledonia to provide accommodation support at the Elgin complex in the UK North Sea. The contract, beginning in mid-April next year, has a firm duration of 162 days with one 30-day option.

In its Q2 operational update on 5 August, Prosafe said that Safe Boreas continued the contract with Equinor at the Mariner installation in the UK and was in full operation throughout the second quarter. The contract’s firm period has been extended through September 2019 as Equinor exercised in April three of six one-month options.  

Hague and London Oil PLC announced on 31 July the spudding of the Andromeda North well in the Southern North Sea, in which it holds a 45% working interest, while Spirit Energy has 55%. The Andromeda North well is targeting around 40 Bcf of gas resource.

Fluor Corporation said on 1 August that its company Stork was awarded a contract extension by Centrica Storage Limited to continue providing fabric maintenance and associated services for the company’s UK onshore and offshore oil and gas assets.

Cluff Natural Resources Plc announced on 5 August that Licence Operator Shell UK Ltd had begun a 3D seismic survey over the Pensacola Prospect on Licence P2252 in the Southern North Sea. The survey is being conducted by Shearwater GeoServices using the Polar Empress and operations are expected to take around two weeks to complete. Final results from the survey are expected to be received in early Q3 2020, after data is processed, Cluff Natural Resources said. 

Published: 22-08-2019

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