UK DTI Offers 97 Licenses in 22nd Licensing Round

In one of his first announcements as new UK Energy Minister Mike O'Brien gave the country's oil and gas industry a boost with offers from the 22nd Offshore Licensing round.

Mr. O'Brien offered 97 offshore licenses to companies with the desire and determination to fully exploit the remaining potential of the UKCS. Of the 58 companies offered licenses today 15 are potential newcomers to the North Sea.

Speaking to industry executives at a Royal Bank of Scotland Conference in Aberdeen, Mr. O'Brien said:

"The UK's oil and gas industry makes an invaluable contribution to our nation's economy and so early into my new job I am pleased to announce new license offers.

"Today's announcement is proof positive of the investment, exploration and development potential still to be exploited in the North Sea and West of Shetland.

"Our progressive and innovative licensing system is proving a real success in attracting international attention to the North Sea. The new "Promote" license goes from strength to strength improving on the interest of last year with 58 of the 97 license offers going to "Promote" applicants.

"But it's not just the new, smaller independent players who still wish to invest in the North Sea. For this round we also introduced the "Frontier" license to stimulate renewed interest in the area West of Shetlands and 7 license applications covering 27 blocks show that this too has been well received by the industry.

"Today's license offers, which incorporate 10 blocks that have been released under the Fallow Initiative, show that the hard work and innovative thinking initiated by DTI officials and industry experts is paying off.

"We will continue to work closely with industry and continue to create, wherever possible, the right environment in which to maximize recovery of our natural resources. I am looking forward to forming close links with one of our most important and respected industries."

The full 22nd Offshore Licensing Round awards consisted of 32 "Traditional" Offshore Production Licenses, 7 "Frontier" and 58 "Promote" Licenses covering 163 blocks in all. Successful applicants will have a fixed period in which to decide whether or not to accept the offers.

Twenty-Six Onshore Petroleum Exploration and Development Licenses are awarded too, more than three times the amount awarded in the 11th round.

Additionally, in a move designed to further reduce the bureaucracy on companies operating under an oil and gas license, the DTI has announced that it is shortly to write to operators relieving them of the need to submit an Annual License Return and to introduce the principles of e-government to expedite the process of license relinquishments.

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

The "Traditional Seaward Production license" has an initial term of four years (for exploration), four more years (to draw up and submit a Field Development Plan), and a production period of 18 years, which can be extended. After the first term the licensee will be required to relinquish at least 50% of the licensed area with a further relinquishment of all acreage not covered by a Field Development Plan at the end of the second term.

DTI will take further steps to cut red tape by removing the need for a whole class of periodic returns of information by companies. It will also take another step towards meeting the Prime Minister's goal of making all Government services available electronically by introducing an entirely electronic procedure for Licenses surrenders and relinquishments.
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