UK proposes new 'Frontier' exploration license for west of Shetland Isles

By OGJ editors
HOUSTON, Feb. 11 -- A new "Frontier" license that allows offshore operators to apply for relatively large acreage on the UK's Atlantic margin or continental shelf west of the Shetland and Orkney islands at significantly reduced costs will be offered in an upcoming offshore licensing round.

The new license, recently announced by UK Energy Minister Stephen Timms, also gives operators more time to carry out the necessary exploration and development, extending that period for 2 years "over and above" the time allowed under a traditional license.

"We look forward to seeing which blocks will be designated in the forthcoming 22nd offshore licensing round and the exact terms of the new licenses," said officials of the UK Offshore Operators' Association. Timms said he planned to designate the date of the licensing round "in the coming weeks," but other UK officials indicated to OGJ that the licensing round likely would be "at the end of February."

In announcing the new license at an energy conference in Sanderstolen, Norway, in early February, Timms cited it as "further proof of our commitment to innovate where possible and maximize the full potential" of oil and gas reserves on the UK's continental shelf.

"By reducing the cost and extending the exploration time of the license, we are sending out a strong signal to companies that exploration and development in challenging areas will be supported and encouraged by [the UK] government," Timms said. "Following on from the success of the Promote license in the 21st round of licensing, which provided great incentives to the smaller prospectors, I believe that the Frontier license offers benefits to the more established players who are more likely to prospect in the new blocks."

The Frontier license will permit operators to apply for relatively large amounts of offshore acreage west of the Shetlands and later to relinquish up to 75% of that acreage after an initial screening phase, during which the normal rental fees will be discounted by 90%.

The new license will be offered only for those areas west of the Shetland Isles, comprising areas 1 and 4 of the UK Department of Trade and Industry's Strategic Environmental Assessment process. However, the exact areas for which the new license will be available have not yet been decided, officials said.

Traditional licenses also will be offered for the same areas west of the Shetlands and for all other areas included in the round, officials said. Promote licenses will be offered only in areas other than west of Shetlands.

The new Promote license offers licensees the opportunity to assess and promote the prospectivity of the licensed acreage for a 2-year period without stringent financial, technical, and environmental entry checks required for traditional licenses. However, officials said Promote licensees will not be approved as operators and will not be permitted to drill wells until they have passed those checks and made firm commitments to complete initial-term work programs. For the period of this assessment, the license rental fee will be 10% of the rental fee for the traditional license (£15/sq km).