OGV Energy's UK North Sea Energy Review – February 2022

The government’s launch of a consultation on the climate compatibility of new oil and gas projects, the gas price surge and its effect on energy bills, and a lot of drilling and development updates marked the first few weeks of 2022 in the UK North Sea oil and gas industry.   

The organisers of the SPE Offshore Europe conference, which was scheduled to be held live in Aberdeen in early February, was postponed and the full conference and exhibition was rescheduled to 5-8 September 2023. The decision for the postponement was taken in early January, due to the Covid situation and in line with the Scottish Government guidance on the situation. 

“We will have discussions with industry and our stakeholders about the possibility of holding an event focused on the energy transition in Aberdeen later in 2022. This would build on the extensive, high-quality content that we had lined up for February to support a fair energy transition,” Jonathan Heastie, Portfolio Director – Energy & Marine at RX (Reed Exhibitions), co-organiser with the Society of Petroleum Engineers (SPE) of SPE Offshore Europe, said. 

But Subsea Expo, the world’s largest annual subsea exhibition and conference, is set to go ahead and be held live as it returns to Aberdeen at P&J Live, 22 - 24 February 2022. 

The UK High Court ruled in January in favour of the Oil and Gas Authority (OGA) in a lawsuit brought last year by environmental campaigners, who had argued that OGA’s strategy of maximum economic recovery of petroleum while supporting the net-zero emissions goal by 2050 was “unlawful” and “irrational”. 

Justice Cockerill dismissed the case of the environmentalists, rejecting “the contention that the Strategy is unlawful because the definition of "economically recoverable" was irrational.” 

OGA welcomed the judgment and said “We remain firmly focused on regulating and influencing the oil, gas and carbon storage industries to both secure energy supply and support the transition to net-zero.”  

The OGA welcomed the launch of the UK government’s consultation. “We welcome the launch of this consultation. Alongside the net-zero test the OGA is applying to our decisions such as field developments, these proposals recognise the important role of industry in helping meet the UK’s energy needs while accelerating the energy transition to net-zero,” said Dr Andy Samuel, Chief Executive of the OGA. 

OGUK, the leading body for the UK offshore oil and gas industry, also welcomed the launch of the consultation. “Our industry welcomes the transparency that a checkpoint for future BEIS licensing decisions provides. It is vital that this checkpoint is robust and ensures that future licensing rounds are compatible with the UK’s climate change ambitions, while maintaining investor confidence in the UK Continental Shelf,” Katy Heidendreich, OGUK Supply Chain & Operations Director, said. 

At the end of December, the Aberdeen & Grampian Chamber of Commerce, the Scottish Chamber of Commerce, and the British Chamber of Commerce called for a “reasoned debate” over the future of the UK’s oil and gas industry. 

In response to the letter of the business leaders, Energy and Climate Change Minister, Greg Hands, said that the government remains “absolutely committed” to the sector, its 200,000 jobs, and to the North Sea Transition Deal. 

“There will continue to be an ongoing need for oil and gas over the coming decades while we transition to low carbon alternatives,” Business and Energy Secretary Kwasi Kwarteng said. 

“Turning off domestic supply overnight isn’t the answer,” Kwarteng added as he quoted minister Hands’ letter to the business leaders. 
“We’re backing the oil and gas sector to decarbonise in a way that protects jobs and energy security,” Kwarteng noted. 

The burden of the high energy prices could be lowered if the UK government imposes a one-off “windfall tax” on oil and gas operators in the North Sea, opposition politicians suggested in early January. 

OGUK commented on this proposal, saying that “a one-off ‘windfall tax’ on the UK’s offshore oil and gas operators would cause irreparable damage to the industry and leave consumers even more exposed to global shortages, the industry’s leading body has warned.” 

“This idea is offering consumers false hope – and the risk of real long-term damage to UK Plc,” Jenny Stanning, OGUK External Relations Director, said.

“In the longer-term a windfall tax would also be the worst thing for consumers because it would damage competitiveness, and discourage energy companies from investing in the UK. That would reduce our energy security and make us even more dependent on imports from places like Russia and the Middle East,” Stanning added. 

Company news

Equinor said in January it had revised down its estimate of the total recoverable reserves in the Mariner field from an earlier assessment of approximately 275 million barrels to about 180 million barrels. The revision will result in an impairment in the region of US$1.8 billion which will be reflected in IFRS net operating income for Equinor’s Exploration and Production International segment in Q4 2021 results.  

Kistos noted at the end of December recent press speculation in relation to the company and confirms that it is a participant in a process being run by TotalEnergies to sell interests in certain of Total’s West of Shetland gas assets.

Wood secured around $160 million in UK North Sea contracts in Q4 2021, strengthening its position as the leading partner for operations solutions in the region, following a series of contract awards with key clients, including Shell UK and Dana Petroleum.

Neptune Energy announced at the end of December the award of a two-year contract extension to Petrofac for engineering services for the Neptune-operated Cygnus Alpha and Bravo platforms in the UK Southern North Sea.

IOG plc said on 10 January that drilling operations had continued at Southwark since the first development well was spudded on 30 December 2021. However, the Noble Hans Deul rig experienced an increasing challenge with seabed conditions that, if not remediated, would compromise rig stability, the company said. 

“This is a frustrating but absolutely necessary step to ensure we can drill and complete the Southwark production wells in a fully safe manner, which is always our foremost priority. Our team is working around the clock with our drilling contractors Noble Corporation and Petrofac to minimise the interruption and resume the Southwark drilling programme at the earliest opportunity,” Andrew Hockey, CEO of IOG, said. 
Harbour Energy will assess the commerciality of the Dunnottar project after “marginal accumulations” were found at the prospect after the drilling of the exploration well in the UK North Sea was completed.   

Baird Capital’s global private equity team announced on 18 January an investment in Scotland-based Subsea Technology & Rentals (STR), which will allow STR to develop its equipment and service offerings through organic and acquisition-lead growth. The investment, the terms of which were not disclosed, will also enable STR to further expand its geographical reach, with the Americas, mainland Europe, and Southeast Asia being a key focus for the company, supporting the rapidly growing offshore wind sector, STR said. 

Serica Energy has contracted a rig for the drilling of the high-impact North Eigg exploration well in the summer of 2022, the company said in a corporate update on 20 January. North Eigg is a gas prospect located close to Serica’s BKR fields and it is expected that a successful discovery could be tied back to existing infrastructure in a carbon neutral manner.

Serica also plans a well intervention campaign to take place this year to improve the production potential of several Bruce and Keith wells in the coming years.  
 

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