North Sea Licenses Surge To All Time Record

A record 152 oil and gas production licenses are on offer to 99 companies under the 23rd Oil and Gas Licensing Round, the highest number since licensing began in 1964, the days of Dr Strangelove and Goldfinger, Energy Minister Malcolm Wicks revealed today.

The results, which indicate a vote of confidence in the future of oil and gas exploration in the UK, herald the entry of 24 new firms to the North Sea. The licenses, covering 264 blocks, are broken down as follows:

  • 70 Traditional license offers, 38 more than in 2004
  • 6 Frontier license offers, 1 less than in 2004
  • 76 Promote license offers, 18 more than 2004

The previous high was the fourth round in 1972 when 118 licenses were issued. If all the offers are accepted, 24 of the 99 companies will be new entrants in the North Sea. This continues the trend of ever improving success in license applications and awards in recent years.

Speaking this morning at the Offshore Europe 2005 Conference in Aberdeen, Mr Wicks said:

"I was seventeen in 1964, the year Harold Wilson became Prime Minister, and the impact of North Sea exploration wasn't at all clear. Many, even within the industry, doubted there was oil or gas to be found. Well, 40 years on the discoveries are still being made and the country has been greatly boosted as a result.

"But we are not being complacent, our licensing innovations are producing results in our effort to maximise the production of the North Sea's remaining resources. Industry is delivering a vote of confidence in its future.

"I'm determined that we maximise the exploitation of the remaining reserves which could be between 22 and 28 billion barrels of oil equivalent. I'm impressed with the drive and determination of the companies that are seeking to make this goal a reality. "

The good news continued with the drilling commitments promised by the successful companies in the awards. 17 wells have been firmly committed to so far, more than any amount promised for a decade.

Successful applicants will have a fixed period in which to decide whether or not to accept the offers.

The 23rd Offshore Licensing Round opened for applications on 10th March 2005. The application window closed on June 9, 2005.

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.

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