UK North Sea Oil & Gas Review

The licensing policy for oil and gas exploration areas, expectations on well decommissioning and carbon storage, as well as field development updates featured in the UK North Sea oil and gas industry in the past weeks.

The UK government continued with moves under its pragmatic and realistic approach to the country’s energy transition by confirming new licensing opportunities for oil and gas exploration and production in the North Sea.

The government will mandate annual oil and gas licensing in the UK North Sea in a bid to boost energy security and cut dependence on imports of fossil fuels, the UK said.         
    
Legislation will require the North Sea Transition Authority (NSTA) to invite applications for new production license on an annual basis, providing certainty and confidence to investors and industry.

Each annual licensing round will only take place if key tests are met that support the transition to net zero. The first test is that the UK must be projected to import more oil and gas from other countries than it produces at home. The second is that the carbon emissions associated with the production of UK gas are lower than the equivalent emissions from imported liquefied natural gas, the government said.

If both these tests are met, the NSTA will be required to invite applications for new licences annually.

“Domestic energy will play a crucial role in the transition to net zero, supporting jobs and economic growth, while also protecting us from the volatility of international markets and diversifying our energy sources,” Prime Minister Rishi Sunak said.

“The clarity and certainty that our new legislation will provide will help get the country on the right path for the future.”

David Whitehouse, CEO of the leading industry body Offshore Energies UK, said:

“The UK needs the churn of new licences to manage production decline in line with our maturing basin. A predictable licencing process with transparent checks will support the highly skilled people working in the sector, while ensuring the granting of new licences is compatible with energy security and net zero.”  

The NSTA is offering 27 new licences in areas prioritised because they have the potential to go into production more quickly than others, the regulator said.

These licences in the Central and Northern North Sea, and West of Shetland were awarded first to let operators press ahead with their plans to explore and develop oil and gas resources. In recent years, the average time from licence award to production is around five years.   

Oil and gas currently contribute around three quarters of the UK’s domestic energy needs and official forecasts show that, in the energy transition, they will continue to play a role in the energy mix for decades to come.

“Ensuring that the UK has broad options for energy security is at the heart of our work and these licences were awarded in the expectation that the licensees will get down to work immediately,” Stuart Payne, NSTA Chief Executive, said.

“The NSTA will work with the licensees to make sure that where production can be achieved it happens as quickly as possible.”

Energy Security Secretary Claire Coutinho commented,

“These new licences are a welcome boost for the UK industry, which already supports around 200,000 jobs and contributes £16 billion to the economy each year – while advancing our transition to low-carbon technologies, on which our future prosperity depends.”

Offshore Energies UK (OEUK) welcomed the award of new oil and gas licences, saying that it would strengthen homegrown energy security as the sector continues its expansion in wind, hydrogen, and carbon capture and storage.

“The reality of the energy transition is that we need both oil and gas and renewables in an integrated system to protect the UK’s energy needs over the coming years,” Offshore Energies UK Chief Executive David Whitehouse commented.

“Energy security is national security. We need pragmatic policy and political consensus if we are to realise £200billon potential company investment in UK wind, hydrogen and carbon capture, and oil and gas production over this decade, with all the jobs and work for our supply chains this will bring.”

In early November, Pauline Innes, Director of Supply Chain and Decommissioning at the NSTA, wrote a letter to licensees reminding them of their obligation to decommission wells in a timely manner.

“Currently compliance with guidance is patchy and the NSTA is concerned at the number of deferrals for well decommissioning activities that are being sought. While exceptional circumstances may arise to justify a deferment application, we do not normally expect to receive such requests,” the regulator said.  

“Failure to meet a licence requirement in relation to well decommissioning may result in the matter being passed to the NSTA’s Disputes and Sanctions team.”

The NSTA have also updated the guidance on applications for a Carbon Storage Permit. The updated guidance is intended to assist those involved in the process and content of an application for a Carbon Storage Permit which, if granted, allows the injection of CO2 into a suitable underground geological formation in the UKCS, subject to the terms of the Carbon Storage Permit.
 
In company news, bp said in early November it had successfully started production from the Seagull oil and gas field in the UK North Sea, boosting energy supplies, supporting the supply chain and jobs, and underpinning continued production from an offshore facility that has been operating for 25 years.  

Seagull has been developed by Neptune Energy as a subsea tieback to the bp-operated central processing facility (CPF) of the Eastern Trough Area Project (ETAP) in the central North Sea, around 140 miles east of Aberdeen.  
 
The new field is expected to produce around 50,000 barrels of oil equivalent gross per day at peak production.

“The start-up of Seagull is a fantastic milestone that demonstrates how bp is investing in today’s energy system and, at the same time, investing in the energy transition,” said Doris Reiter, senior vice president, bp North Sea.

Neptune’s UK Country Director, Alan Muirhead, said,

“From the beginning, the partners have taken an innovative approach to ensure we can collectively maximise the recovery of domestic energy resources while extending the life of existing subsea infrastructure to reduce development costs.”

Ithaca Energy has announced the successful completion of its acquisition of the remaining 40-percent stake in the Fotla Discovery and three exploration licences from Spirit Energy. The acquisition brings Ithaca’s working interest in the Fotla Discovery to 100 percent. Development plans are currently being evaluated for Fotla, which was discovered in August 2021. First production from the discovery is targeted in 2026. The conceptual field development plan consists of a subsea tieback to existing infrastructure, Ithaca Energy said.     

United Oil & Gas PLC said it would terminate the Asset Purchase Agreement with Quattro Energy Limited under which the parties had agreed to the conditional sale by United to Quattro of the UK Central North Sea Licence P2519 containing the Maria discovery in Block 15/18.  

“Notwithstanding the prospectivity of this licence, against the backdrop of the current regulatory and fiscal challenges impacting the UK North Sea undermining investor confidence in the progression of potential developments in this sector, Quattro have been unable to raise the funds to complete the transaction,” United Oil & Gas said.
 
Serica Energy plc will carry out studies to determine the feasibility of re-developing the Kyle field by means of a subsea tie-back to the Triton FPSO vessel via the Bittern field facilities during an initial two-year licence period, after Serica was awarded the Block 29/2a containing the field in the latest UKCS Offshore Licensing Round. Serica’s internal preliminary mid-case estimate of recoverable resources from the redeveloped field is about 9 million barrels of oil.

Well decommissioning specialists Well-Safe Solutions have signed an agreement with Spirit Energy to add a well from the Appleton field to the existing scope of the Well-Safe Defender semi-submersible rig. This project will add approximately one month of work to the backlog of the Well-Safe Defender, which mobilised in March 2023 to plug and abandon 14 wells on the UK continental shelf for Spirit Energy.
 
“We are proud to continue our relationship with Spirit Energy and look forward to continuing our world-class decommissioning operations later this year,” Chris Hay, Director of Strategy and Commercial at Well-Safe Solutions, said.

Jersey Oil & Gas said that the owners of the Buchan field licences, JOG and NEO Energy, had executed agreements to acquire the Western Isles floating production, storage and offloading (FPSO) vessel. The FPSO will be used as the processing facility for the planned redevelopment of the Buchan field. Work is progressing at pace on Front-End Engineering and Design (FEED) activities in order to facilitate Field Development Plan (FDP) approval in 2024, Jersey Oil & Gas said.
 
“Re-using existing high-quality infrastructure and modifying it to be electrification-ready is exactly in line with our stated low carbon strategy and the net zero related objectives of the industry,” Andrew Benitz, CEO of Jersey Oil & Gas, said.  

“The vessel is the cornerstone to completing the engineering work required to facilitate FDP approval for the Buchan redevelopment next year.”    

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