The UK Government has opened the country's 28th offshore oil and gas exploration licensing round, amid concerns about a slow-down in the basin.
Wood Mackenzie’s annual review of UK upstream oil and gas said capital investment continued to increase, however, this was set against the backdrop of project delays, production underperformance, and poor exploration success. Read more: North Sea Slowdown Predicted
The report followed data released by the Department of Energy and Climate Change (DECC), which also showed a slowdown in drilling activity.
Earlier this week, Oil & Gas UK CEO Malcolm Webb (pictured) said: “Both the Wood Mackenzie review and the latest DECC figures clearly illustrate the parlous state of exploration on the UKCS. We are just not drilling enough wells in UK offshore waters and those that we are drilling are not finding enough oil and gas." Read more: Two-speed North Sea
Just yesterday, analysts Hannon Westwood outlined it's view of exploration activity, saying: "exploration drilling levels remain disappointing and likely results from a combination of factors, including smaller prospect size, lower gas prices, disparate ownership and high development / operating costs".
It added: "Against a backdrop of ageing infrastructure and funding challenges, unless industry steps up exploration pace, there is the real prospect of less than optimal recovery of potential North Sea resources, which will be detrimental for business, tax receipts and employment."
Read more: North Sea needs exploration boost
Today, Oonagh Werngren, Oil & Gas UK’s operations director said: "Exploration in the North Sea has been challenged in recent years in both the number of exploration wells being drilled and their success rates.
"Recent data from the Department for Energy and Climate Change (DECC) demonstrates that in 2011, the UK continental shelf (UKCS) experienced a 50% drop in the number of exploration wells drilled, a number which has so far yet to recover. Only 15 wells were drilled in 2013, and less than 100 million boe were discovered in the last two years. Explorers cite access to rigs and equity capital as being the major contributing factors.
"Today’s announcement of the 28th offshore oil and gas licensing round will, we hope, encourage new applicants as well as established companies to explore the basin, but industry needs to work collaboratively with HM Treasury, and DECC in a tripartite arrangement, as outlined by Sir Ian Wood’s recommendations in his Interim Report. We believe this approach ultimately holds the key to the future success of the North Sea.”
The previous 27th Licensing saw a record number of licenses awarded, including 21 new entrants. There are now more than 50 companies at work in the North Sea.
Last year 36 offshore projects, with an associated capex of over £9 billion, were approved.
Opening the 28th Round for bids, Energy Minister Michael Fallon said: “There continues to be extremely high level of interest in North Sea oil and gas, which is unsurprising when there could be as many as 20 billion barrels of oil still buried deep within the seabed. This new round of drilling for offshore oil and gas will help boost growth, energy security, and jobs in the UK.”
DECC said the latest round supported efforts by Government and industry on a joint Oil and Gas Industrial Strategy.
According to Wood Mackenzie: “Although some uncertainty remains over the longevity of the sector, 2014 could prove to be a pivotal year for the UK's North Sea. The final recommendations from the Wood Review will be delivered in early 2014, and could ultimately change how the industry is regulated. In addition, potentially one of the most significant events to take place next year will be the Scottish independence referendum in September, the results of which could ultimately lead to a division of oil and gas assets between Scotland and the rest of the UK."
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