UK awards widespread licenses, more could follow

Offshore staff

LONDON – Britain’s government has awarded 167 new licenses under the 27^th offshore licensing round.

These cover 330 blocks, with bids for a 61 more blocks undergoing further environmental assessment. These are in regions deemed Special Areas of Conservation and Special Protection Areas.

This year’s round, unveiled in February, attracted by the May 1 deadline a record 224 applications for 418 blocks across the UK continental shelf.

UK Energy Minister John Hayes said: “This successful licensing round shows we are taking the right actionto offer certainty and confidence to investors. Our fiscal regime is now encouraging small fields into production and our licensing regime supports new faces as well the big players to invest. Importantly, we are guaranteeing every last economic drop of oil and gas is produced for the benefit of the UK.”

Mike Tholen, Oil & Gas UK’s economics and commercial director, said: “The record number of applications for licenses in this 27^th round shows that investor confidence is returning following 18 months of constructive engagement with the Treasury and the announcement of several measures aimed at boosting activity.

“However, last year saw the lowest exploration for many decades so we must do everything we can to ensure that the award of licenses translates into actual exploration for the billions of barrels of so far undiscovered oil and gas.

“While the measure announced by the government in the summer to improve the economics of small fields should help, it is only one of the factors influencing exploration and Oil & Gas UK is considering with the Department of Energy and Climate Change, through a joint exploration task group, the levers that could be pulled to boost new drilling.”

Various successful bidders have released details of their awards.

Statoil gained shares in seven exploration licenses, two as operator, and expects more following the outcome of the environmental assessment process. The company takes in 19 blocks west of Shetland and in the North Sea. One license covers three blocks in the Catcher area on the Western Platform, where Statoil and Nexen lead a partnership that plans to drill at least three exploration wells in the next few years.

Over the Faroe-Shetland basin licenses, Statoil says extensive seismic acquisition and processing is planned in what the company considers a relatively underexplored, high-potential region.

Maersk Oil UK has three new operated and six non-operated licenses:

Operated

• West Courageous block 30/1g, with Maersk Oil UK (99.5%) as operator and Gaz de France (0.5%) as partner, adjacent to the Courageous and Oakwood discoveries. There is a commitment to drill one firm exploration well and one contingent well

• Edinburgh area block 30/14b adjacent to Flyndre/Cawdor with Maersk Oil UK as operator (50%) and partner Gaz de France (50%)

• NW Culzean area block 22/24f (split), 22/25f (split), adjacent to Culzean, with Maersk Oil UK as operator (50%) and partners JX Nippon (17.07%), ENI (16.97%), BP (16%)

Non- operated

• North Quad 9 area block 9/9f, (split) 9/10b (part) with Maersk Oil UK (40%) Total operator (50%), First Oil (10%)

• Moray Firth 1 block 13/29c Maersk Oil UK (50%) with Nexen operator (50%)

• Fisher Bank basin 2 block 22/8b, Maersk Oil UK (20%), BG operator (45%), KMG (35%)

• Fisher Bank basin 3 block 22/9b, (split) Maersk Oil UK (20%), BG operator (45%), KMG(35%)

• Jearen High blocks 22/10b, 23/6, 23/22b, 22/15c Maersk Oil UK (30%), Centrica as operator (40%), EON (30%)

• Jackdaw South area blocks 30/2e, 30/3b, Maersk Oil UK (33.3%), Gaz De France as operator (33.3%), JX Nippon (33.3%).

Martin Rune Pedersen, Maersk Oil UK managing director, said: “Our aim is to double our production in the next five to seven years, and the award is integral to sustaining future growth…

“Our planned drilling program and project developments will see an intense period of activity and I am delighted that in a tight rig market we have already secured theSedco 704 rig on a two-year contract starting early 2013 that will also allow for timely execution of the wells from the 27^th round awards.”

Ithaca Energy was awarded two operated licenses. Both offers are based on completion of subsurface and development concept screening studies, with a drill-or-drop decision due within two years of formal license award.

The company will operate block 29/5d in partnership with Dyas UK and Petrofac Energy Developments UK. The block is within the Greater Stella Area of the central North Sea, adjacent to block 29/10b, which contains Ithaca’s recently appraised Hurricane discovery.

It is also close to planned location of the FPF-1 floating production platform unit that will serve the Stella and Harrier field developments in block 30/6a. Block 29/5d partners have identified a prospect known as Twister that appears analogous to the Hurricane Rogaland sand interval.

Block 15/17b, which Ithaca will operate in partnership with Premier Oil, is in the Outer Moray Firth basin, close to Ithaca’s Athena field and Premier license interests. The block contains four undeveloped Jurassic oil discoveries, designated the Piper Isles, and is close to the producing oil fields Piper, Saltire, Iona, and Chanter.

Fairfield Energy picked up licenses covering blocks 3/2b, 211/23e, 211/23f in the northern North Sea and block 43/28 in the southern North Sea.

CEO Chris Wright said: “Block 3/2b is adjacent to our Darwin project where we are currently drilling well 211/27e-13 on our 25^th round acreage.

“The award of blocks 211/23e and 211/23f will deepen our portfolio around our core Dunlin field area, allowing us to further develop these proven plays. The award of block 43/28 is also a significant development…as it allows us to broaden our exploration portfolio into the Carboniferous play in the southern gas basin.”

Dana Petroleum secured 22 blocks and part-blocks over seven areas in the North Sea.

The company will operate block 13/23d in the Inner Moray Firth, immediately west of the Blake field. Dana plans to drill a well here in 2014.

Blocks 217/22, 217/23, 217/24, 217/25, 217/29, and 217/30 (Dana 50%, operator) are west of Shetland. The work program consists of acquiring and reprocessing 2D seismic leading to a drill-or-drop decision on the Carron prospect.

In partnership with Talisman (65%, operator), Dana (35%) has blocks 29/17, 29/18 (part), 29/22 (part), and 29/23 (part) in the central North Sea. Work obligations include an extensive new 3D seismic survey in an area previously covered only by 2D data.

In partnership with E.ON (50%, operator), Dana (50%) has block 48/1e in the southern gas basin, in between the company’s recent successful Platypus appraisal well and producing Babbage field.

In partnership with DONG (60%, operator), Dana (40%) has blocks 208/6 and 208/7 west of Shetland, where the work commitments include acquiring and reprocessing 3D seismic data to refine the Mull and Glen Spey prospects.

A group comprising DONG (35%, operator), GDF Suez (25%), Nexen (25%), and Dana (15%) was awarded an extensive frontier license including; 209/9 (part), 209/10 (part), 209/11 (part), 209/12, 209/13, 209/14 (part), 209/16 (part), and 209/17 (part).

Norwegian Energy Co. (UK) won six licenses, including four operatorships. Most are close to the company’s existing acreage. Four of the concessions are in the central North Sea, and include acreage around theHuntington field, while the other two licenses are in the northern North Sea. There are no drilling commitments.

Noreco’s awards are as follows:

• Block 22/9b (split), close to the Huntington field
• Witch Ground Graben blocks 14/11, 14/12, and 14/16 (operated), next to Noreco’s existing licenses P1650 and P1768
• Blocks 21/8c, 21/9b (split), 21/10c, 21/14a, and 21/15b (operated), west of Huntington
• Magnus basin blocks 210/7, 210/12, and 210/13 (operated)
• Blocks 220/21 and 220/22, (operated), along the median line with Norway and next to license PL639
• South Viking Graben block 16/18b (split), extending existing acreage position in license P1776.

Parkmead was provisionally awarded six new licenses comprising interests in 25 offshore blocks or part-blocks. Additionally, the company applied for certain licenses in the southern gas basin, where the outcome remains to be determined.

In the central North Sea, Parkmead gained three licenses covering eight blocks.

Block 15/16e (Parkmead 34%, operator) is immediately northeast of the Parkmead-operated Perth oil field and contains two Jurassic oil prospects. The work program involves reprocessing existing 3D data to refine the trapping geometries.

Blocks 29/27, 29/28, 37/3, and 37/4 (Parkmead 100%, operator) are southwest of the Auk oil field and contain a large gas prospect with numerous adjacent smaller satellites. Here the program calls for acquisition of further 2D seismic to mature prospect mapping.

Blocks 30/12c, 30/13c, and 30/18c (Parkmead 30.5%, operator) are in the Central Graben, north of the Orion oil field. They contain three oil prospects and one lead. The two most significant prospects are stacked and could be tested by a single well. The work program involves reprocessing existing 3D seismic to refine a well location, and a firm exploration well targeting the Skerryvore prospect within four years.

West of Scotland, Parkmead has picked up 100% of one large license spanning 10 blocks in the frontier Rockall Trough area.

Blocks 132/3, 132/4, 132/8, 132/9, 132/13, 132/14, 132/18, 132/19, 142/28, and 142/29 contain three leads - two are in the shallow Eocene horizon and could be significantly de-risked by seismic amplitude and AVO analysis. The program here involves obtaining the existing 3D seismic, detailed amplitude, and AVO analysis.

West of Shetland, the company secured two licenses spanning seven blocks.

Block 205/12 (Parkmead 30%, operator) contains a major Palaeocene oil prospect (Davaar) in between the Schiehallion oil field and Total’s current Laggan-Tormore gas development. The prospect is at the same stratigraphic horizon as adjacent discoveries and can be de-risked by detailed seismic amplitude and AVO analysis.

Blocks 205/23, 205/24, 205/25, 205/28, 205/29, and 205/30 (Parkmead 43%, operator) contain a gas discovery (Bombardier) and two oil leads. One is the large Cretaceous Eddystone lead, on the flanks of the Rona Ridge between the Lancaster oil discovery and the Clair oil field.

Independent Oil and Gas (IOG) won a 100% operating position in a license covering blocks 8/20 and 8/25. Discoveries on either could feature in a future development of the Skipper field in block 9/21a, where IOG has a 50% interest.

The Skipper development is subject to a successful appraisal well, scheduled to be drilled next summer. On blocks 8/20 and 8/25, the company has committed to acquire and reprocess 300 sq km (116 sq mi) of 3D seismic.

IOG views recoverable resources as potentially 28 MMbbl. Any future developments would probably be tax-efficient, with each field likely to benefit from the government’s £800-million ($1.3-billion) heavy oil field allowance. IOG also has further license applications pending.

Bridge Energy UK successfully applied for two licenses in the central North Sea.

• Skerryvore (30/12c, 30/13c, 30/18c) - Bridge has a 25% equity interest with Parkmead Group as operator. The acreage includes the Skerryvore oil prospect in between the Flyndre and Clyde fields, a diapiric structure imaged on 3D seismic. Further seismic studies are planned to optimize the location of the commitment exploration well.

• 9/9g - Bridge has a 30% interest, with MPX (Oil & Gas) as operator. The part-block contains an extension of the Aragon prospect in adjacent part-blocks 9/9d, 9/14a, and 9/15d, in which Bridge also has a 30% stake.

Further Bridge applications in the southern North Sea remain subject to more detailed environmental impact assessments.

Enegi won its first two UKCS licenses, which it will operate with a 100% interest. The company plans to develop these in harness with ABTechnology and the latter’s production buoy technology.

Both applications were based on the identification and evaluation of assets considered not suited to conventional development solutions. Both licenses have been drilled previously, with a clear indication of the presence of hydrocarbons, but their remoteness from available infrastructure means that a small, standalone development solution would be necessary.

Block 3/23 (split - southern section) is on the southwest margin of the East Shetland basin and contains the Malvolio prospect, a Palaeocene appraisal opportunity within the Upper Montrose Group sand.

Well 3/23b-3, drilled by Chevron in 1988 based on 2D seismic data, defined the prospect’s extreme northwest margin, with oil observed in cuttings over shakers and later in the well log analysis.

More recent seismic data revealed a strong amplitude anomaly downdip from the well, significantly reducing risk. Energi estimates unrisked recoverable oil in the range of 8-95 MMbbl. Water depth is 397 ft (121 m), and the location is 48 km (30 mi) from the nearest appropriate infrastructure, serving Total’s Dunbar field.

The initial work program involves accessing additional well data and further 3D seismic with a view to confirming the geobody volume and thickening away from the original Malvolio well as well as confirming the feasibility of developing the block using buoy technology.

Further prospectivity has been identified within the block, and this will be assessed as part of the overall appraisal of the license area.

Block 22/12b, in the Forties-Montrose High area of the central North Sea, contains the Phoenix discovery. Shell drilled the 22/12a-10 discovery well in 2004, encountering a 30-ft (9.1-m) oil column in the Forties Sandstone member, also productive in nearby fields such as Forties, Nelson, and Montrose.

Phoenix is a low relief dip closed structure in water depths of 295 ft (90 m) with unrisked recoverable resources of 9-51 MMbbl. The location is 11.9 km (7.4 mi) northwest of the Montrose oil field and 15.8 km (9.8 mi) southeast of the Nelson oil field, so suitable development infrastructure is unlikely to be available.

Enegi will access additional well data and acquire further 3D seismic to determine Phoenix’s volumetric range and will confirm the feasibility of developing the block using buoy technology. It has identified further prospectivity within the block.

Faroe Petroleum was awarded seven new exploration licenses. Four of these are west of Shetland:

• Grouse Extension (blocks 217/14 and 217/15) – Faroe Petroleum 37.5% and operator. This license is in the north of the Faroe-Shetland basin. The blocks contain an extension of Faroe’s Grouse prospect, a large structural and stratigraphic trap within post-basalt strata. The work program has yet to be confirmed, but will likely tie in with the program for the existing Grouse license.

• Glenfarclas (blocks 208/21 (part), 208/26, and 214/30d) – Faroe Petroleum 33.34% and operator. This permit is on the southeastern flank of the Faroe-Shetland basin, and north of the Glenlivet gas discovery in which Faroe Petroleum has a 10% interest. The Glenfarclas prospect is a large structural and stratigraphic trap of Palaeocene age, exhibiting an amplitude anomaly. The work program involves reprocessing 3D seismic data and additional geotechnical studies.

• Dunvegan (blocks 205/16b (part), 205/17 (part), 205/21c, and 205/22b) – Faroe Petroleum 50% and operator. The location is at the southern end of the Faroe-Shetland basin. Dunvegan and associated leads are combined structural and stratigraphic traps within Lower Cretaceous strata, associated with strong seismic amplitudes, and situated within a regional three-way closed structure. The program calls for acquisition of new long-offset 2D seismic and geotechnical studies.

• Ribbon (block 206/7b) – Faroe Petroleum 50%. E.ON E&P UK is the operator. The location is on the eastern flank of the Faroe-Shetland basin, adjacent to the Clair oil field. Prospectivity has been identified within Palaeocene and Cretaceous strata. The partners must reprocess 3D seismic data and conduct additional geotechnical studies.

Faroe’s three North Sea licenses are:

• Blocks 29/12 (part), 29/13 (part), and 29/14 – Faroe Petroleum 33.33%, operator Endeavour Energy (U.K.) on the southern margin of the Central Graben. Numerous leads have been identified at both Palaeocene and Jurassic levels. The license work program includes obtaining and reprocessing 2D seismic.

• Greater Perth area block 15/16e – Faroe Petroleum 33.33%, operator DEO Petroleum Exploration, is in the Outer Moray Firth, northeast of the Perth oil field development.

• Blocks 3/28c and 9/3e – Faroe Petroleum 50%, operator RWE Dea UK SNS, on the western edge of the northern North Sea Viking Graben, and north of the BP-operated Bruce field. Prospectivity has been identified within the Palaeocene interval in what Faroe describes as “an exciting new play concept for the area.”

Trapoil was provisionally awarded three traditional licenses covering nine new exploration blocks, in a 50/50 split with partner Noreco.

Blocks 14/11, 14/12, and 14/16 are on the flank of the Moray Firth, Witch Ground graben. Noreco will operate this acreage, which is in Trapoil’s existing core exploration area immediately west of the Athena field and the Bordeaux and Brule discoveries. Work obligations comprise shooting new 3D seismic across the acreage.

Blocks 21/8c, 21/9b (split), 21/10c, 21/14a, and 21/15b are in the central North Sea. Again, Noreco will operate the blocks, close to the Apache-operated Forties field. Trapoil has access to CGGVeritas’ 3D long-offset data covering this acreage. Work commitments comprise obtaining and reprocessing 3D seismic.

Block 16/18b (split) is in the South Viking graben. Trapoil will operate this block, which the company describes as “protection” acreage for its Sienna prospect in block 16/23b. Firm work obligations involve acquiring and reprocessing 3D.

Trapoil has another potential license award pending environmental assessments.

Endeavour International gained seven licenses covering 10 exploration blocks in the North Sea, all around its stronghold areas. Endeavour will operate all the blocks.

Valiant Petroleum was provisionally granted the following blocks:

The company describes the awards as an important step in its plan to exploit specific play fairways within a mature basin setting, and to re-orient its UK portfolio toward material opportunities and near-term development potential. Work commitments include one firm well and four contingent wells, and selective seismic purchase and reprocessing.

10/30/2012