North Sea Bids Hit 30 Year High

Applications for the UK's latest offshore Oil and Gas Licensing Round have hit a thirty year high with firms applying for a record 279 blocks, the largest number applied for since 1972, Energy Minister Malcolm Wicks said.

The 23rd Licensing Round offers three types of licenses for exploration and development of the North Sea including the "Frontier" license which has helped spark interest in the relatively unexplored areas North and West of the Shetlands Islands.

UK Energy Minister Malcolm Wicks said:

"The fact that this is the highest number of blocks applied for since the 1970s is a solid vote of confidence from the industry in the potential development of North Sea fields.

"PILOT has been vital to helping us create the type of licenses and regulatory environment that attract and stimulate activity in the North Sea. The increase in applications from new firms is a clear endorsement of that approach, and a vindication that there is significant development opportunities still available for the right firm in the North Sea."

To underpin the licensing regime, PILOT, the Government and industry forum set up to secure a long term future for the industry, has launched the Stewardship Initiative which aims to set an industry standard to ensure that firms make the most of opportunities in the United Kingdom Continental Shelf (UKCS).

The aim of 'Stewardship' is to unlock potential reserves of between 3 and 5 billion barrels of oil equivalent from existing fields and to ensure that operators are making the most of their licenses. This will be done in two stages:

1. To help monitor progress, producing fields will compile data for DTI,

2. If any improvements can be identified, DTI will meet the relevant operators to discuss, and, under the license the operator can be requested to carry out improvements.

Malcolm Webb, chief executive at the UK Offshore Operators Association, (UKOOA) and member of PILOT and the oil and gas Industry Leadership Team, said:

"The PILOT Stewardship process is the latest in a series of voluntary and effective agreements between Industry and Government, and has Industry's full support.

"It introduces procedures for identifying the mature oil and gas fields most at risk of failing to realise their full potential, allowing steps to be taken to secure the investment needed to extend field life. This will allow the recovery of the remaining oil and gas reserves to be maximized and, equally important, the retention of existing infrastructure to produce nearby resources.

"We believe this initiative will make a significant contribution to Government and Industry's challenge to maximize the recovery of oil and gas in this mature province".

UK Energy Minister and Chair of PILOT, Malcolm Wicks added:

"Our challenge is to ensure we make the most of the technology and opportunities available to maximize oil and gas production in the North Sea. Thanks to the work of PILOT, the Stewardship program puts us on course to achieving that, and to delivering on a sector vital to the UK economy."

PILOT also publish their annual report for 2004/5 today, updating on development of the UKCS and progress towards the 2010 target of producing 3 million barrels of oil equivalent a day.

The 23rd Offshore Licensing Round opened for applications on 10 March 2005. The application window closed on June 9, 2005. 134 applications were received in all by the DTI, 7 Frontier license applications were received, 3 more than in 2004 and strengthening the drive to untap the potential for this region. The applications from the 23rd Offshore 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. Total receipts were as follows:

  • 67 Traditional license application were received, 37 more than from 2004,
  • 60 Promote license applications were received,
  • 279 Seaward blocks were applied for in total, 115 more than the previous round,
  • Of the 114 companies who applied 28 are new applicants to the North Sea.
    • 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 potential of the licensed acreage for an initial two-year period without the stringent entry checks required as part of a traditional license (Promote Licensees will not, of course, be allowed to do Exploration Operations work until those checks have been passed). 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.

      A PILOT workgroup identified significant potential for additional production from the UK's existing offshore "brown" fields, estimating that additional reserves of between 3 -and 5 billion barrels of oil equivalent could be won. DTI introduced a new process following the March 2005 PILOT Brown Fields Report. One conclusion of that report was that UKCS reserves Stewardship requires a mechanism to determine whether field owners are fully identifying opportunities and providing a means to realise them. The new Stewardship process supersedes an existing DTI Annual Reporting Process for producing oil and gas fields. DTI held seminars in April to alert the industry to these changes and bring field managers fully on board with the new Stewardship process.

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