UK Puts Eighty Previously Licensed Inactive Blocks in 24th Licensing Round

Eighty previously licensed North Sea blocks that are inactive are to receive a shake up in the 24th Offshore Oil and Gas Licensing Round announced today by Energy Minister Malcolm Wicks.

The blocks were recently given up under the Government's Fallow process which seeks to put blocks and discoveries in the hands those who can best exploit them.

Since its inception in 2002, activity prompted by the fallow initiative has already resulted in a number of discoveries. In addition, 13 previously fallow discoveries have now had plans for development approved. Collectively these are likely to have reserves ranging between 200 and 250 million barrels of oil equivalent

Energy Minister Malcolm Wicks said:

"The launch of this Round demonstrates that the Government and Industries 'Fallow initiative' to stimulate activity in the North Sea is continuing to deliver results and demonstrating the Governments ongoing drive to maximize the exploitation of our oil and gas resources.

"The annual licensing opportunities my Department is offering, in combination with the license initiatives developed with industry, through PILOT, is helping to ensure the UK's position as one of the worlds successful oil and gas regions is maintained. That's good for our economy and for UK jobs."

The Government's full suite of license types, developed to encourage full exploration, is on offer. To address the particular challenges in the West of Shetland region and the outer reaches of the Irish Sea, the 'Frontier' license will be offered. The "Promote License", in addition to its continued offer in the North Sea, will be on offer, at least for the 24th Round, West of Shetlands and the inner regions of the Irish Sea in order to test its ability to foster new thinking in these regions. The Traditional license will apply to all regions on offer.

Under the 'Frontier' and 'Promote' Licenses, the rental fee will be cut by 90% for the first two years compared to the rate for a Traditional Production License. This, together with the extended exploration and development periods on the 'Frontier' License, will give companies an added incentive to find oil and gas in new regions.

The acreage on offer will include those areas currently unlicensed that were offered in last years 23rd Round with the addition of the Irish Sea that has recently been the subject of the DTI's Strategic Environmental Assessment (SEA) process. This offer is designed to build on the success of last years Round.

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 TI'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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