Tayvis Dunnahoe
Exploration Editor
The UK Continental Shelf (UKCS) is home to more than 4,000 wells drilled since the passing of the country's Continental Shelf Act in 1964. More than £50 billion has been invested in the last half-century, and the UKCS has produced more than 45 billion boe during the same period.
Potential remains: The region contains an estimated 20-30 billion boe of undeveloped resources. But due to flagging exploration and development amid the downturn, an aging infrastructure, and a lack of clear regulation guiding these offshore assets, opportunity is drawing to a close in the next 2 years.
This is an opinion shared by several respondents to a report published by PricewaterhouseCooper LLP (PwC) titled "Sea Change: The future of North Sea Oil & Gas" published June 13. The report summarizes responses from more than 30 high-level leaders in the North Sea's offshore industry. While areas like Norway and the UK's northern North Sea continue to see some development, the central and southern North Sea offshore the UK is declining at a rapid rate.
Ongoing exploration
Areas such as West of Shetland, the Atlantic Margin, and several large discoveries on the border between the UK and the Norwegian Continental Shelf each stand as future potential developments. Some of these will see activity through subsequent years despite variations in oil price, but others may likely see no investment before higher prices stabilize.
With the UK's recent vote to exit the European Union and an already struggling offshore industry, the country is moving to bolster its domestic production through new tax regimes and the establishment of a central Oil and Gas Authority to ease the process of future licensing and permitting.
The near-term future of North Sea exploration and development is assured with projects such as Clair Ridge, Kraken, Catcher, Mariner, Laggan-Tormore, the Quad 204 (Schiehallion) redevelopment, and the giant Johann Sverdrup discovery near the NCS-UKCS border.
PwC's report specified that respondents referring to "terminal decline" were speaking literally about the UK basin's oil potential. This term is factual in that regard, however, the report added, "The key is how we manage that decline for the greater good of all stakeholders in the basin."
The general consensus among respondents is that the North Sea has a future, despite the region's high operating costs and impact of lower oil prices.
Decommissioning
The big concern for the UKCS central and southern North Sea areas involves the ramp up of decommissioning to 2020. In May, OGJ reported that the North Sea could see more than $80 billion of investment through 2040 (OGJ, May 2, 2016, p. 54). Much of this work is targeted for the southern and central North Sea.
Beginning with the start of natural gas production from West Sole in 1967 on Block 48/6 and oil production from Argyll and Duncan in 1975 on Blocks 30/24 and 30/25a, the UK is home to some 300 platforms operated by 75 companies and more than 1,500 licenses.
PwC's Sea Change report refers to decommissioning as the "elephant in the room," but cites that the looming expense of these endeavors could be turned into a positive if operators can align planning to maximize further extension on late-life assets. The real risk for the UKCS is an historically add-on infrastructure in which most of the region's platforms are interconnected on some level. As assets are retired, this could create a domino effect for other platforms in the same network.
In addition, the UK may become the largest scale decommissioning project the industry has yet experienced. On a global scale, the North Sea has been a major source of oil and gas for more than 50 years. As the central and southern North Sea matures, the UK is seeking the best methods of transition toward its final phase. According to PwC's Sea Change report, opportunities remain, one of which may in fact be a graceful retirement of the UKCS.
