Norway's Johan Sverdrup oil field is ramping up production to levels not seen in years in the North Sea.
It is one of many changes underway in an industry characterized by a profusion of new corporate players, more diverse crude quality and an expanding global customer base.
The North Sea's leading producer nations, Norway and the UK, differ in the structure of their industries and their remaining resources, but have both found ways to boost their prospects and defy the more pessimistic predictions made when oil prices collapsed in 2014.
Since the downturn, Norway's state-controlled Equinor has focused on getting the 2.7 billion barrel Johan Sverdrup field on stream efficiently, with low costs and ahead of schedule, as well as environmental innovations such as powering the facility from the national grid, with a major hydropower component.
Johan Sverdrup's rapid rise -- production reached 200,000 b/d three weeks after its October 5 startup -- will deflect criticism of operational problems and sharp falls in production at other Norwegian fields, including several operated by Equinor. It also exemplifies a trend in the North Sea toward production of heavier, more sulfurous crude, which, however, appears to be finding a ready market.
Johan Sverdrup has a second phase of production due on stream in 2022 that will lift output to 660,000 b/d from 440,000 b/d. And it will be joined by another big project, Johan Castberg, which lies in the Barents Sea and is due on stream in 2022.
The UK outlook is less clear, but the industry, and regulatory system, have arguably reformed faster, facing a potential cliff-edge in terms of new projects.
This year has exemplified the trend of large US companies handing over their North Sea assets to dedicated companies seen as more able to devote the attention needed to get the most out of depleted fields. Chevron, ConocoPhillips and Marathon Oil have all agreed asset sales, with Israeli-owned Ithaca Energy, private equity-backed Chrysaor, and London-listed RockRose Energy respectively.
The major European oil and gas companies meanwhile have focused on the West of Shetland area, with BP increasing its stake in the Clair heavy oil field and Equinor taking over the challenging 300 million barrel Rosebank project from Chevron, both last year.
UK oil output is up by about 30% from its 2014 nadir, at around 1.1 million b/d, thanks to advances in efficiency and technology, a more assertive regulatory system, fiscal reforms, and a desire among some investors for well-understood assets in a relatively stable political environment.
The customer base for North Sea crude has also widened to include regular shipments to East Asia of grades such as Ekofisk and Forties, offsetting declining demand from the US.
Where the next boost to UK production will come from remains to be seen, but Equinor's Rosebank is one possibility, along with Hurricane Energy's "fractured basement" fields in the West of Shetland area, currently in the pilot production phase, and Siccar Point Energy's Cambo project with Shell, which could yield several hundred million barrels.
Another emerging area for the UK is heavy oil production. As the type of crude oil produced in the Norway and the UK diversifies, mostly becoming heavier and more sulfurous, new varieties of ultra-heavy crude appear to be becoming viable.
EnQuest, which brought the Kraken ultra-heavy oil field on stream in 2017, has reported robust prices for Kraken crude and says it is being used as a component for direct blending into 0.5% bunker fuel; currently in demand from the shipping industry due to new environmental regulations.
Equinor followed Kraken with its own UK heavy oil project, Mariner, which came on stream in August, and there are others, characterized by their technical difficulty but large volumes of oil, waiting in the wings for possible development.
This is not to diminish the challenges faced by both the Norwegian and UK oil industries in pinning down their next sources of production, with decline set to resume in the coming decade. Exploration activity has struggled to recover, with the effectiveness of Norway's tax rebates for exploration being questioned.
And legacy players such as BP and Shell may struggle to justify the outlay on upstream activity on their home turf in the face of relentless environmental criticism, raising questions about the ability of lower-profile companies to carry on alone.
Nonetheless, the heads of the European majors, many of whom cut their teeth in the North Sea and see it as an incubator of know-how and technology, have been fulsome in their support.
Speaking in Aberdeen in September, Total CEO Patrick Pouyanne warned the North Sea industry it could not rest on its laurels and had more work to do to improve competitiveness, noting, for example, regulatory barriers to transporting drilling rigs between Norway and the UK. But, he said: "We are determined to continue our strategic commitment to the region."
Source: SP Global