Opportunities in the UK’s energy supply chain, upcoming projects and exploration and appraisal drilling, and a major new discovery in the North Sea were the highlights of the UK North Sea oil and gas industry in the past month.
The UK’s world class offshore energy supply chain will see a wave of new opportunities created by upcoming oil and gas projects, a study by the North Sea Transition Authority (NSTA) and the Global Underwater Hub (GUH) showed.
The new research has identified seven near-term projects which will require 30 new wells and 194 kilometres of pipeline. The study also showed that vessel and rig owners will be especially in demand as their services will be needed for more than 5,000 vessel days and nearly 2,500 rig days.
“This new research provides clear evidence that companies with vessels and rigs on their books can look forward to plentiful near-term project opportunities in UK waters. To fully capitalise on them, effective collaboration across the industry is absolutely vital,” Bill Cattanach, NSTA Head of Supply Chain, said in a statement.
Neil Gordon, GUH Chief Executive, said:
“It’s more imperative than ever that we have a joined-up approach to these developments which takes account of the vast scale of all opportunities on the horizon for the subsea supply chain. Industry must have confidence in the regulatory environment, leading to visibility and, more importantly, surety of the domestic project pipeline.”
NSTA has created a dedicated carbon transportation and storage team to respond to the rapid growth of the UK's carbon capture and storage (CCS) industry. The team will oversee the delivery of offshore carbon transportation and storage developments, following successful exploration and appraisal.
“The NSTA is progressing evaluations of applications in the UK’s ground-breaking First Carbon Storage Round at pace, and we hope to be in a position to make offers of award within weeks,” said Jo Bagguley, NSTA Principal Regional Geologist.
Offshore Energies UK has warned that more action is needed from both government and industry to support supply chain companies in playing a critical role in sustaining oil and gas activity while helping to build the UK’s low-carbon future energy systems.
Last year, the UK oil and gas industry contributed £28 billion gross value added (GVA) to the economy, providing jobs for more than 200,000 people across the country, OEUK said in its new Supply Chain report.
However, a supply chain management sentiment survey in the report reveals the sector has little confidence in its ability to invest in future growth and the energy transition. Many firms say that cost inflation is squeezing their profit margins.
The UK government needs to demonstrate their ongoing commitment to delivering net zero by 2050, while recognising the role of domestic oil and gas production during this journey. Moreover, OEUK called on the government to provide a stable regulatory and fiscal framework which provides the supply chain with a predictable and attractive business environment to continue investing in supporting the UK’s energy security.
“We ask for the government’s support to help ensure that the local UK supply chain accounts for 50% of the inputs into new energy projects. Leveraging the skills and technologies of new and existing UK companies will be crucial to realising our net-zero goals,” OEUK said.
Katy Heidenreich, OEUK’s Supply Chain and People Director said, commenting on the findings in the report:
“Around a fifth of supply chain companies surveyed said poor visibility of the future UK projects is affecting their ability to plan and service activity both in the near and longer term, a problem that OEUK is working with industry to address.”
Improving visibility and more certainty of work will ensure the supply chain retains and invests in resources in the UK, according to OEUK’s report.
OEUK has also said that calls by opposition politicians and union leaders for another increase in the windfall taxes on energy producers, linked to BP’s and Shell’s latest global profits announcements, are misleading.
Mike Tholen, OEUK’s director of sustainability, said it was wrong to offer false hopes to hard-pressed consumers.
“These calls for an increase in the UK windfall tax, linked to the global profits of energy producers, are deliberately misleading. The UK is subject to global tax agreements which say that it cannot tax profits made by companies outside of the UK. That means such a tax could never be implemented. It is irresponsible to pretend otherwise.”
“That rate of UK tax is already so high it risks driving companies out of UK waters. All parties have acknowledged that we will need oil and gas for decades to come. So why risk damaging our own secure supplies from the North Sea?” Tholen added.
A new poll, commissioned by OEUK, showed in late February that the overwhelming majority of the Scottish public believe that the Scottish government should not act to speed up the decline of domestic production of oil and gas, and should either allow it to happen as currently forecast or act to extend production further. The research by Opinium, based on 1,000 adults, suggests 36 per centof the public believes the Scottish Government should try to extend production beyond the next 20 years. A further 23 per centsay the government should do nothing and let production decline as forecast. The poll also suggests just 5 per centwant to see the Scottish Government act to end North Sea oil and gas production more quickly.
Aberdeen & Grampian Chamber of Commerce, one of the biggest critics of the Scottish Government's proposed presumption against future oil and gas exploration in the North Sea, has called on all candidates running for the SNP leadership to “reflect on the findings”.
The upstream segment is expected to dominate upcoming oil and gas projects in the UK, accounting for more than 65 per centof the total project starts between 2023 and 2027, data and analytics company GlobalData said in a report. The study showed that 94 projects are expected to start operations in the UK by 2027. Out of these, the number of upstream projects is expected to be the highest with 61 project starts, followed by midstream with 24 projects, refinery, and petrochemical at seven and two projects, respectively.
After a disappointing 2022 for exploration and appraisal activity in the UK North Sea, the outlook for 2023 has got off to a positive start with initial results reporting discoveries at Orlov and Pensacola, Westwood Global Energy Group said in a report at the end of February. Including wells that are currently active, Westwood holds 13 prospects targeting around 1.5 billion boe of pre-drill resources that could potentially operate in 2023, as well as five appraisal wells.
“Despite an increased focus on infrastructure-led exploration (ILX) in recent years and a general lack of success in high impact (HI) and frontier wells, companies continue to pursue HI opportunities in the UKCS, where positive results can be both company makers and provide the catalyst for further activity and investment in a play,” Westwood said.
In company news, Neptune Energy and its partner, Spirit Energy, announced production had commenced from the 10th well at its operated Cygnus gas field in the UK Southern North Sea, unlocking additional supplies for UK homes and businesses.
Deltic Energy announced a significant gas and oil discovery at the Pensacola prospect operated by Shell. Pensacola could be one of the largest natural gas discoveries in the Southern North Sea in over a decade, Deltic Energy said.
Stena Drilling has signed a new contract with Ithaca Energy for Mobile Offshore Drilling Unit (MODU) Stena Spey in UKCS expected to start between 1st June 2023 and 1st September 2023 for a firm scope of one well.
Well-Safe Solutions and Apache Corporation have signed a multi-year framework agreement to decommission wells in the North Sea, as part of the decommissioning specialist’s Plug and Abandonment (P&A) Club offering.
Capricorn Energy’s board has decided to advise shareholders to vote against the NewMed merger. As a consequence of this decision, Capricorn and NewMed have mutually agreed that the business combination agreement from September 2022 would be terminated with immediate effect.
EnQuest said that in response to the changes in the Energy Profits Levy (EPL), the company has further optimised its capital programme for 2023, whereby Kraken drilling will be deferred.
“The impact of the EPL on cash available for investment has resulted in the Group prioritising quick-payback opportunities at Magnus and deferring spend on Kraken drilling,” EnQuest said.
Serica Energy announced on 20 February that final commissioning of the Gannet GE-04 well had been completed and production via the Triton FPSO had commenced. The well results were above the pre-drill expectation and initial production rates have exceeded 10,000 barrels of oil per day.
“Including the Tailwind Acquisition assets, we have an exciting investment programme of value-adding activities throughout 2023 and 2024 which has started with the Gannet GE-04 well being brought onto production,” Serica Energy CEO Mitch Flegg said.
Fugro said that its Blue Essence, a 12-m uncrewed surface vessel (USV), had received approval from the Maritime and Coastguard Agency (MCA) to operate the first USV with an electrical remotely operated vehicle (eROV) in UK waters.
“Fugro’s Blue Essence® fleet has already been successfully operating in Europe and Australia and recently completed a fully remote inspection off the coast of the Netherlands, in Europe’s busiest part of the North Sea, demonstrating the benefits of this innovative way of working. We are delighted that the USV can fly the UK flag and are looking forward to undertaking our first operations in the UK soon,” said Nick Simmons, Director USV and Remote Working Europe and Africa at Fugro.
Hartshead Resources has signed a contract with GEOxyz UK Limited for a geophysical survey covering the Anning and Somerville field developments. The Geo Ocean III survey vessel is expected to be mobilised to the Anning and Somerville field locations in April 2023.