UK North Sea - Oil & Gas Review

Major deals, field development updates, services contracts, and reports and plans from leading oil and gas organizations and authorities were the highlights of the UK North Sea oil and gas industry between the middle of April and mid-May.

Production efficiency (PE) on the UKCS rose to 75 percent in 2018 – sustaining what has now been a successive six-year rise from the 2012 low of 60 percent, the Oil and Gas Authority (OGA) said in its annual performance review, known as the ‘Tier Zero’ meeting with the managing directors of the 22 largest oil and gas producing companies in the UK, which takes place early in the second quarter of every year.

“Continuing this improvement in operational efficiency is imperative in order to reach the target of 80% by 2022,” the OGA said.

In April, the OGA published the Corporate Plan 2019-2024 outlining its priorities for the next five years. The seven key themes for the OGA will be revitalise exploration, improve asset stewardship, drive regional development, improve decommissioning efficiency, leverage technology & data, create the right conditions, and develop people, processes and systems. The OGA’s ambition is to be a world leading authority setting the framework for a sustainable and competitive UK oil and gas industry, and its purpose is to maximise the economic recovery of oil and gas from the UKCS.

In terms of revitalising exploration in the UKCS, the OGA released a new podcast at the end of April, in which Nick Richardson, Head of Exploration & New Ventures at the OGA, said:

“It’s a very positive time for exploration, especially in the frontier West of Shetland region which is now a key area for growth. The OGA estimates there is 4 billion boe yet to be discovered from existing mapped prospects, with an additional 11 billion boe possible from new plays in the UKCS. Finding costs have gone from $9 to $1 per barrel, adding a further incentive to explore. The extensive opportunity-set, and improved industry performance, underlines the considerable potential of the UKCS with there being every chance of more significant finds.”

In early May, the UK government said that it is backing industry plans for a multi-million pound underwater engineering hub in Aberdeen. The hub would help make Scotland a go-to destination for subsea engineering, creating jobs and business opportunities, the UK government said.

Also in early May, the OGA published its UKCS Technology Insights 2018 report, which showed that oil and gas operators spent more than £240 million in 2018 on developing and deploying technologies, an increase of 30 percent since 2016, and the rising trend is expected to continue. One of the key findings of the report is that operators need closer engagement with the supply chain as their contribution to providing technology solutions is crucial.

In terms of innovative technologies, the Oil & Gas Innovation Centre (OGIC) said at the end of April that it had signed its 100th project, taking its total investment into innovative oil and gas technology to £6 million over the last five years.

Energy skills body OPITO published in early May its Skills Landscape 2019–2025 report, which showed that technology advances, internationalisation, and the transition to a lower-carbon future are rapidly changing skills demands in the oil and gas sector.

Some 80 percent of the current workforce in the sector will still be working in the industry in 2025, the report, part of the UKCS Workforce Dynamics research series, revealed. However, the rapidly changing industry will need to attract thousands of new people, including specialists in areas that don’t currently exist.

“In just six years it is estimated the industry needs to attract 25,000 new people and 4,500 of those will be into completely new roles that do not currently exist in areas such as data science, automation and new materials. Future roles may include ‘Artificial Intelligence Business Developer’, ‘Virtual Reality Journey Builder’ and ‘3D Material Scientist’,” OPITO said.

“These new roles will require a different set of skills and competences, which means we need to look at ways of reskilling our current workforce and consider how we compete with other industries for future talent,” the report found.

“We have the potential to leverage UK skills and capabilities around the world, but close collaboration and partnership is needed to make an effective and lasting impact,” said Mark Cullens, Director of Strategic Engagement at OPITO.

In mid-May Oil & Gas UK said that Southern North Sea is well positioned to support the energy transition and meet the UK’s dual challenge of increasing energy demands with a lower carbon footprint.

“Our sector is key to supporting a diverse energy mix which helps us meet the UK’s dual challenge of satisfying ongoing energy demands with a lower carbon footprint. We can do this by the oil and gas sector working to reducing its operation emissions as well as supporting the advancement of low carbon and abatement technology,” OGUK chief executive Deirdre Michie said at the SNS2019- The Southern North Sea Conference & Exhibition.

In deals and contracts, the biggest news of the past month was Chrysaor saying it would buy the UK oil and gas business of ConocoPhillips for $2.675 billion. The acquisition boosts Chrysaor’s pro forma 2018 production to 177,000 boepd.

“This deal will make Chrysaor the top producer in the UK in 2019 and keep it among the UK’s largest producers for the next few years,” Romana Adamcikova, senior analyst, North Sea upstream at Wood Mackenzie, said, commenting on the deal.

“Considering the company was a relatively small producer before it acquired a batch of assets from Shell in 2017, this is a story of incredible growth,” Adamcikova said, adding that Chrysaor could make further moves in the near future in the region to bolster its mid- to long- term production outlook.

On 19 April, Repsol Sinopec said that it targets additional barrels from its UKCS assets, focusing on a number of smaller, incremental production-adding opportunities.

On 23 April, Archer Limited said that Chevron awarded it a new five-year firm contract, with two times one year options, for platform drilling services for the Alba Northern and Captain platforms in the UK.

KCA Deutag said on the next day that CNOOC Petroleum Europe had awarded it a four-year drilling contract extension to its existing contract for the Scott platform in the UK North Sea.

Sparrows Group announced contract renewals with two long standing major operators in the UKCS for the provision of crane management services over periods of one and five years. The contract renewals are worth an estimated £30 million in revenue in the first quarter of 2019.

On 28 April, Delek Group confirmed earlier media reports that its wholly-owned subsidiary Ithaca Energy had submitted a bid to buy Chevron’s interests in the oil and gas fields Alba, Alder, Britannia (and its satellites), Captain, Elgin/ Franklin, Erskine and Jade in the UK North Sea. Delek Group said it was in discussions with Chevron in relation to its bid, but there was no certainty that the bid and discussions would lead to a binding agreement.

France-based Sercel said on 30 April that the UK had authorised the deployment of its QuietSea Marine Mammal Monitoring System in UK waters. The UK Department for Business, Energy & Industrial Strategy (BEIS) and Joint Nature Conservation Committee (JNCC) approved the use of the technology for a seismic survey operated by CGG in waters off the Shetland Islands.

Apache Corporation reported on 1 May that its North Sea production averaged 66,000 boepd in Q1—the highest quarterly production in two years, thanks to a full quarter of production from Garten, a new development well at Callater, and strong uptime on producing facilities.

Craig International said on 2 May it had secured a five-year contract, with a two-year extension option, to source and supply products for maintenance, repair, and operations at Spirit Energy’s onshore and offshore sites in the UK. The contract is potentially worth £21 million over seven years.

Azinor Catalyst said on 3 May it had committed to the OGA to the drilling of two wells in 2020 as part of a three well 2020 campaign.
Emerson announced on 6 May that it had been awarded a five-year contract from BP to provide predictive maintenance and operational support services to ensure safe, optimized production from its Clair Ridge platform and Glen Lyon floating production, storage and offloading (FPSO) vessel.

Independent Oil and Gas said on 7 May it had signed a Letter of Intent with a view to contracting the Maersk Resilient jack-up rig to drill the Harvey appraisal well. The primary objective of the Harvey appraisal well is to confirm gas resource volumes.

Exceed announced it had secured a two-year contract for well engineering and well project management to support Serica Energy with its future well operations.
Siccar Point Energy said on 14 May that it had completed drilling the Blackrock exploration well 204/5b-2 in the West of Shetland, with CEO Jonathan Roger saying: “I am very encouraged by this well result and look forward to further exploring this material exploration play with our partners.”

Australia-listed Talon Petroleum said on 15 May that it had completed the acquisition of EnCounter Oil Limited, with which Talon now holds 100 percent interests in EnCounter’s highly prospective exploration licences in the UK North Sea.

Talon also continues to review prospects to add to its UK North Sea exploration portfolio, with several strong opportunities under consideration, the company said.