UK North Sea Oil & Gas Review

Several annual industry reports, many contracts, corporate news, and drilling updates were the highlights in the UK oil and gas sector this past month.

Industry association OGUK published at the end of November its tenth annual Decommissioning Insight report for 2019.

“Decommissioning is an ever-growing market for the UK, and with around £1.5 billion to be spent each year, this represents a significant and enduring opportunity for the UK supply chain,” the report says, highlighting the finding that decommissioning now accounts for just under 10 per cent of the overall expenditure in the UK oil and gas industry.

Over the next decade, expenditure on decommissioning activities in the UK Continental Shelf (UKCS) is expected to reach £15.2 billion, in line with last year’s assessment of £15.3 billion, OGUK said in the report. Well decommissioning with £6.8 billion makes up 45 per cent of the forecast expenditure over the next decade. More than 6,000 kilometres of pipelines are to be decommissioned in UKCS over the next ten years. A total of 1,630 wells are expected to be decommissioned over the next decade, with around 150 wells to be decommissioned in the UKCS each year.

Commenting on the report, OGUK’s decommissioning manager Joe Leask said:

“We’re already seeing exciting new companies emerging as specialists in decommissioning, either offering full-scope solutions or focusing on specialising in areas including offshore well decommissioning and onshore dismantling and disposal. These innovative business models offer industry real choices whether operators carry out decommissioning themselves or pass the scope to those companies offering increasingly competitive solutions.”

Another report, by OGUK and PwC, showed on 20 November that the North Sea and its supply chain could become global leaders in the energy transition with Carbon Capture, Utilisation and Storage (CCUS) technology and the production of hydrogen.

OGUK also published in the past month its second annual Energy Transition Outlook, presenting the opportunities and challenges for the UK oil and gas industry in the low-carbon future.

“The oil and gas sector will have to earn its position in this new energy world,” OGUK’s CEO Deirdre Michie said in the foreword to the report.

The report shows that many operators and supply chain members of OGUK already have direct involvement in developing and supporting the rapid growth in low-carbon solutions, from carbon capture (CCUS) to offshore wind, from electric vehicles (EVs) to biofuels and hydrogen.

The report also called for urgent action to progress carbon capture and storage in the UK.

“The government and industry must work together to progress to the next stage five key projects across the UK which look to capture, transport and store carbon dioxide from heavy emitting industrial processes including power plants,” OGUK says.

In company updates and contracts, French geoscience company CGG announced a programme to deliver the largest OBN multi-client survey ever conducted in the UK Central North Sea (CNS). The survey is expected to begin early next year, and has already received significant industry interest. The survey is being partially pre-funded by BP. First results from the survey are targeted for the first quarter of 2021.

Petrofac announced on 20 November the acquisition of W&W Energy Services (W&W) to acquire an entry-level position in the US onshore Operations and Maintenance market. Petrofac also said that it had secured US$120 million worth of Engineering & Production Services EPS contracts, including a new three-year Engineering, Procurement, Construction and Commissioning (EPCC) Framework Agreement (FA) with a North Sea operator. The new projects awards coincide with key North Sea contract extensions for EPS, including a two-year renewal of an existing seven-asset Operations and Maintenance contract, and the extension of EPS’ existing Engineering Services contract with Chevron North Sea to June 2020.

Maersk Supply Service said on 21 November that it had won an integrated FPSO tow and mooring installation project for an operator in the North Sea. The scope of the work includes project management, engineering and offshore execution involving six anchor handling tug supply and subsea support vessels. Maersk Supply Service is set to provide the full scope of work—from site preparation, installation of pile anchors, tow of the FPSO, through to final hook-up operations.

Hibiscus Petroleum announced on the same day that had selected the concept for the development of the Marigold and Sunflower oil fields in the UKCS. The company aims to establish a field development plan for Marigold and Sunflower by the end of 2020. Development options that have been considered included a fixed platform, a floating solution, as well as a tieback to existing, nearby infrastructure solutions. The selected concept is to drill and complete subsea wells that are tied back to a Floating Production Storage and Offloading unit (FPSO) via flexible flowlines and umbilicals. This concept was chosen because it enabled the highest project value with the lowest execution and commercial risk, Hibiscus Petroleum said.

Investment company Reabold Resources Plc said on 22 November that Corallian Energy, in whose fundraise it took part, would use the proceeds to prepare for a planned Initial Public Offering (IPO) early in the second half of 2020, and to complete the work required to finalise UK North Sea well locations for both the Unst prospect in the Viking Graben and the Dunrobin prospect in the Inner Moray Firth.

Longboat Energy, a company set up by the former management team of Faroe Petroleum, started trading on the AIM market of the London Stock Exchange on 28 November. The former Faroe Petroleum managers created Longboat Energy to fast track the creation of a new full-cycle North Sea oil and gas company.

Ithaca Energy provided on 28 November an operations and trading update, saying that drilling at Ithaca-operated Captain field, which involved the drilling of five infill wells and two well workovers, was completed in November. The drilling concluded the first of the two planned well campaigns of the Phase 1 enhanced oil recovery programme on the platform area of the main field, with the second campaign scheduled to begin at the start of 2021.

i3 Energy plc also provided a 2019 drilling summary on 28 November. The Company will now prepare for a multi-well appraisal of Serenity and the Liberator West area in the summer of 2020. Development options for Liberator and Serenity will be progressed focusing initially on utilisation of existing infrastructure, i3 Energy says.

Babcock announced a new three-year contract to provide Serica Energy with offshore helicopter crew transport services. Babcock will transport Serica Energy passengers to and from the company’s Bruce complex in the North Sea, 340 kilometres northeast of Aberdeen.

Hurricane Energy said on 2 December that it had struck oil in the Warwick West area, with initial analysis of oil samples indicating light oil in place. At the Lancaster Early Production System (EPS) project, the sixth cargo of crude oil from the Lancaster EPS was lifted on 14 November, taking total oil sales to 2.5 million barrels since First Oil in June 2019. Average production for the rest of the year is expected to continue to be in line with guidance for Q4 2019 of around 11,000 bopd.

Hague and London Oil PLC (HALO) said that the Andromeda North exploratory well in the UK North Sea found a significant gas column. Andromeda North is located in the block immediately to the west of the Greater Pegasus Area that has been successfully drilled and tested while currently under review for development concepts.

KCA Deutag announced on 2 December that it had been awarded a five-year multi-million-pound contract extension by CNR International Ltd (CNRI) for three platforms operating in the UK North Sea. Under the contract, KCA Deutag will provide drilling operations and maintenance services on CNRI’s Ninian South, Ninian Central, and Tiffany platforms.

Neptune Energy and its joint venture partners BP and JAPEX said on 3 December that they had awarded new drilling services contracts for the Seagull project in the UK North Sea. All contracts have been awarded under a three-year agreement, with two one-year options to extend. Under the contracts, MI Drilling Fluids will provide mud, drilling fluids, and well-bore clean-up services; Halliburton Manufacturing & Services Limited will work on a Completions Equipment and Services contract for the provision of High Pressure/High Temperature completions equipment; and Schlumberger Oilfield UK will provide perforating services.

Initially, Seagull is expected to produce some 50,000 barrels of oil equivalent (boe) per day, of which 80 per cent would be oil, across its 10-year design life. Proved plus probable gross reserves at Seagull are estimated at 50 million boe.

“Seagull has already been recognised as an excellent example of what can be achieved through a collaborative approach between partners and we look forward to continuing to progress with this development at pace,” said Shona Campbell, Neptune Energy’s Seagull Project Manager.

Shell has won a court order which prevents protesters from Greenpeace from boarding unmanned Shell oil and gas platforms in the North Sea.

“We strongly believe in the right to protest and will keep defending it. Shell can try to shut us up, but we will only get louder,” Greenpeace said, commenting on the court order.

Subsea project delivery and execution provider to the offshore energy industry, Rever Offshore, said on 5 December that it had successfully completed the subsea infrastructure decommissioning project of the Greater Dunlin Area for Fairfield Energy. The work scope involved multiple campaigns comprising of preparation, removals of subsea infrastructure and final surveys, along with the management of all recovered waste for processing and safe disposal.

TGS-NOPEC Geophysical Company (TGS) announced on 5 December that it had completed the sale of one of its seismic datasets to OGCI Climate Investments’ Net Zero Teesside project, a carbon capture, utilisation and storage (CCUS) initiative planned for the North East of England. The data will be used to verify the suitability for storage of carbon dioxide (CO2) in offshore reservoirs located in the Permian Gas Basin in the Southern North Sea.

Net Zero Teesside is a full chain CCUS project backed by OGCI Climate Investments and direct project support from six of the largest oil and gas companies globally: BP, Shell, Eni, Equinor, Occidental Petroleum, and Total.

“Our agreement with TGS allows us to carefully analyse the geology of the reservoirs and make the correct decisions that will sustain our CCUS operations for millennia to come,” said Colin McGill, Net Zero Teesside Project Director.