North Sea Still Attracting Global Interest

Latest Offshore and Onshore Licensing Rounds prove successful.

Responses to the 22nd Offshore and 12th Onshore Licensing Round have shown that there is still a great deal of international interest in the opportunities afforded in the UK for oil and gas exploration and recovery.

In addition to the Traditional licenses and the recently introduced Promote licenses, the 22nd Offshore Round saw the introduction of the innovative "Frontier" license designed to spark interest in the newly offered blocks to the North and West of the Shetlands islands. All three licenses generated an encouraging amount of interest:

  • 4 Frontier license applications were received, proving the worth of innovation when seeking to encourage exploration
  • 42 Promote license applications were received, a further improvement on last year's highly successful result
  • 30 Traditional license application were received, equaling the tally from 2003
  • 164 seaward blocks were applied for in total, 25 more than the previous round
  • 20 of the 68 companies who applied are potentially new entrants in the North Sea further endorsing the belief that the UKCS is still a vibrant basin for investment and reward
  • 30 applications for onshore licenses, more than three times the amount from the previous round

  • UK Energy Minster Stephen Timms said:

    "I am delighted with the positive response to our latest offshore licensing round which builds on last year's success.

    "The applications for the new Frontier license, for the area to the North and West of Shetlands, are particularly encouraging. This is an exciting region and the fresh look at what may be available there is to be welcomed.

    "The Government, working closely with industry through PILOT, will continue to innovate to maintain and encourage investment and exploration in the North Sea.

    "Applications for licenses from 20 potential newcomers to the region are a further sign that there remains plenty of interest and belief in the potential of the North Sea."

    The 12th Onshore Licensing Round experienced very positive interest receiving a total of 30 applications - nearly four times as many expressions of interest as a year ago.

    Mr. Timms added:

    "The success of the 12th Onshore Licensing Round should not be overlooked. Making the most of our natural resources will become ever more important in the future and today's results have shown that our commitment coupled with that of the industry can help ensure that the potential of our hydrocarbons is still far from exhausted." The applications from the 22nd Offshore and 12th Onshore Licensing Round will now be studied. The applicants will be interviewed by the DTI to ensure that licenses are awarded to those companies with the best ideas and ability for taking prospects forward to development. Offers of license awards are planned for August/September this year.

    The 22nd Offshore and 12th Onshore Licensing Round opened for applications on 4 March 2004. The application window closed on 4 June 2004.

    The new 'Frontier' License allows companies to apply for relatively large amounts of acreage and then relinquish three quarters of that acreage after an initial screening phase during which the normal rental fees will be discounted by 90%. Additionally, the Exploration and Development periods will be extended by two years over and above those stipulated for the Traditional license. This new license is solely for the areas west of the Shetland Isles, comprising the areas 1 & 4 of the DTI's Strategic Environmental Assessment process.

    The Promote License offers the Licensee the opportunity to assess and promote the prospectivity of the licensed acreage for an initial two-year period without the stringent entry checks required as part of a Traditional license. For the period of this assessment, to a maximum of two years, the license rental fee will be 10% of the rental fee for the traditional license (i.e. it will be 15 per sq kilometer).

    In order to continue beyond the first two years of the Initial Term, the Licensee will be required to submit a report to the Department during the first two years. This report will outline the research and analysis undertaken and include a request to retain the license into the third and fourth year with a commitment that will include the drilling of at least one well, or the conduct of an equivalent agreed substantive activity, by the end of the initial term (i.e. by the end of year four). To be allowed to enter the third and fourth year the deferred financial and environmental checks will need to be satisfied.
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