UK exploration up, but production slipping
Britain’s offshore licensing spree continues, with 104 companies securing acreage under the country’s 24th licensing round. The 150 new licenses cover 246 blocks, both figures close to the records established in the 23rd round.
Although BP, ExxonMobil, and Shell opted out this time, other majors put in strong bids. Chevron won two of 12 licenses awarded west of Shetland, both close to the promising deepwater Lochnagar and Rosebank discoveries. Total also strengthened its position in this area with new acreage next to Laggan, a prospective gas field development. Total was handed further territory around its Alwyn production stronghold in the northern North Sea.
Among the mid-range independents, Maersk Oil operates seven new sets of blocks, including 15/20c, near its recently onstream Dumbarton field. Talisman picked up operatorship of six blocks, four close to its 23rd round frontier licenses.
Further down the scale, EnCana and Oilexco won blocks carrying at least three drilling obligations, one relating to a heavy oil discovery (14/30a-2). Another Canadian company, Ithaca Energy, aims to probe new acreage next to its Athena find to prove up possible extensions.
Exploratory drilling is one of the UK’s main success stories at present, according to the UK Offshore Operators Association (UKOOA). The group’s latest activity survey counted close to 80 new exploration and appraisal wells across the shelf last year, incurring total expenditure of around £600 million ($1.2 billion).
More than a third of these wells were productive, adding potentially 500 MMboe to the UK’s reserves. The largest new find, at a reported 175 MMboe, was ConocoPhillips’ Jasmine; otherwise, the average yield was an estimated 10-15 MMboe, in line with well results from previous years.
Some negative trends also emerged. With half the expected number of new developments coming onstream, production dropped to an average of 2.9 MMboe/d, below expectations. In some fields, gas output was also scaled back, with demand on the UK mainland falling due to competition from new sources, such as Norway’s Ormen Lange field.
UKOOA forecasts a drop in overall investment across the shelf this year of up to £1.5 billion ($2.9 billion), to around £4-4.5 billion ($7.8-8.8 billion).
At the same time, UK operating costs are rising, averaging $9-10/boe compared with $5-6/boe three years ago. The most expensive operating regions are the extremities of the northern and southern North Sea, remote from established infrastructure.
At a briefing in London, commerical director Mike Tholen said combined capital/operating expenditure for some new UK developments could soar to around $25/boe over the next few years. If oil prices fall much further, this could render previously marginal incremental projects uncommercial, he warned.
Norway round also draws crowds
Norway’s Energy Ministry also has opened acreage under the country’s 2006 pre-defined areas scheme (APA 2006). The 48 production licenses awarded are a record for a Norwegian round, and a further 10 could be issued following processing of work plans.
The permits, covering 85 blocks and part-blocks, were divided among 33 oil companies, including eight new to the Norwegian shelf. According to the ministry, there was great interest in developing accumulations close to mature area infrastructure.
Nineteen companies gained operatorships, but as with the UK awards, few of the licenses carry drilling commitments. Lundin is obliged to drill an exploration well east of Sleipner in the North Sea. BG will also drill the undeveloped Bream oil field in the southern part of the Norwegian North Sea. Partner Serica Energy claims up to 100 MMbbl could be recovered from this 1972 discovery using deviated or horizontal completions to lift flow rates. Elsewhere, Total is committed to an appraisal well on the Victoria gas structure in the Norwegian Sea.
The biggest winner in terms of license positions (nine) was Revus Energy, which already had plans to participate in up to eight Norwegian shelf wells this year.
The ministry also issued details of the APA 2007 round: 13 new blocks have been made available in the Barents Sea, but the pre-defined areas in the North Sea and Norwegian Sea have not been expanded. And the government has decided to postpone the country’s 20th licensing round by a year until 2008 - it wants the industry to analyze the results from forthcoming frontier region wells before sanctioning further permits in these regions.
Sevan solution for Shelley
Canadian independent Oilexco has chosen Sevan Marine’s cylindrical hull floating production concept for its first UK North Sea standalone development. The proposed platform, already under construction at the Yantai Raffles shipyard in China, should be installed in 2008 on Oilexco’s Shelley field in central block 22/2b.
The Sevan platform should be on station for a firm five years, with options for a further five. Terms for the $370-million contract had still to be ratified at press time, but the platform will have a probable oil processing capacity of 30,000 b/d.
Oilexco’s production push gathered more steam with a farm-in agreement for another Palaeocene Forties discovery, Ptarmigan, in block 15/29a. The current partners in this 1994 discovery - Chevron, ConocoPhillips, and Gaz de France - have approved a plan under which Oilexco will fund 100% of a three-leg appraisal well on the structure. Upon completion of this program, subject to UK government sanction, Oilexco will operate the field.
Chevron itself has plans to resume studies of Bressay, one of the UK’s largest untouched heavy oilfields, which extends across five blocks southeast of Shetland. Following realignment of the four licenses, Chevron now operates the block with 64.6% interest in partnership with Shell and Statoil. The trio plan an extended well test, the results of which will be used to determine prospects for a future development.
