UK North Sea Energy Review

By Tsvetana Paraskova Decarbonisation and net zero, decommissioning contracts, and operational updates on oil and gas fields in the North Sea were the key themes in the UK oil and gas industry over the past weeks.

Offshore Energies UK (OEUK) says that decarbonisation is ‘one of the greatest challenges of our time’, and announced a conference on the topic in Aberdeen in October. At the conference, the leading representative body for the offshore energy sector will also publish its annual Emissions Report, highlighting the progress the sector continues to make while supplying the energy the country needs in a more sustainable way. According to OEUK, for the energy sector, decarbonisation means reducing greenhouse gas emissions from the production of the energy the UK needs while also cutting the emissions from the usage of that energy.

The UK’s offshore oil and gas industry operating in the North Sea was one of the first industrial sectors to commit to the UK’s Government net zero target of 2050, and the 2045 such target in Scotland.

“Offshore energy companies are already scaling up the solutions needed to fight climate change, expand our energy mix, and position the UK as a future world-leader in low-carbon solutions,” said OEUK Sustainability and Policy Director Mike Tholen.

“By the mid-2030s, oil and gas will still provide 50% of our energy needs, so we must make sure the UK can continue supplying its own demand in a sustainable and cleaner way instead of increasing our reliance on costly, higher-carbon imports.”

Since the start of last year, the North Sea Transition Authority (NSTA) has given the go-ahead to seven projects with potential to produce 100 million barrels of oil and gas, the authority said after a meeting of major North Sea energy operators.

Seven projects capable of producing nearly 100 million barrels and requiring about £1.1 billion of expenditure have been approved by the NSTA since the start of 2022. Those projects can significantly boost the UK’s security of supply amid the energy transition. Operators in the North Sea currently plan to progress 22 projects in the coming years which, subject to robust emissions checks, would target 1.5 billion barrels of oil and gas resources, according to the NSTA.

Stuart Payne, NSTA Chief Executive, said, “The North Sea boasts a vast array of oil and gas, wind and storage resources which can secure the UK’s supply of cleanly-produced energy, rapidly reduce its greenhouse gas emissions, and support hundreds of thousands of skilled jobs. The NSTA will lead the way on efforts to integrate these resources, optimising their enormous potential.”

North Sea operators held open and constructive discussions with the NSTA representatives and placed “a sharp focus on actions and projects which accelerate the transition to net zero,” Payne added.

In the middle of May, the NSTA revoked offshore petroleum licences P.108, P.313 and P.340 insofar as they relate to Fujairah Oil and Gas UK 12 Limited (UK12). Consequently, UK12 is no longer a party to any of these licences. The licences remain in force as they relate to the other licensees.

Notices were served on UK12 in January 2023 and as no further change of control was arranged the NSTA used its powers to partially revoke the licences.

This was the first time in which the NSTA has used its power to partially revoke a licence, and the action has been taken because UK12 did not meet regulatory requirements, the authority said.

In company news, Neptune Energy and its partner, Spirit Energy, announced production had started from the 11th well at its operated Cygnus gas field in the southern North Sea.

The new well is expected to produce around 4,000 barrels of oil equivalent per day (boepd), enough gas to heat around 200,000 UK homes. Together with the 10th well which started up earlier this year, the Cygnus facility is expected to produce enough gas per day to meet the needs of around 1.9 million UK households, Neptune Energy said. “Cygnus plays an important role in supporting UK energy security and has the capacity to supply around 6% of the country’s gas demand,” Neptune Energy’s UK Country Director, Alan Muirhead, said. Service provider for the energy industry, Petrofac, said in its 2022 results release that performance last year was negatively affected by challenges in the legacy engineering and construction (E&C) portfolio.

“Petrofac’s performance for 2022 was severely impacted by the challenges in the Group’s legacy E&C portfolio, which continues to feel the direct and indirect effects of pandemic delays,” said Tareq Kawash, Petrofac’s Group chief executive since 1 April 2023.

The asset solutions and Integrated Energy Services (IES) divisions are performing well, Kawash added. “The outlook for new awards in E&C remains robust, supported by high energy demand and increased focus on energy security and the energy transition. E&C is well positioned on a number of other near-term prospects as evidenced by the recent multi-year, multi-platform Framework Agreement award in support of TenneT’s 2GW offshore wind programme,” the CEO noted.

Reabold Resources said that its analysis had identified on PEDL 183 licence a significant potential discovery, Crawberry Hill, which was drilled by Rathlin in 2013. Reabold’s priority now is to develop plans with the aim of making this a drill-ready appraisal opportunity.

In addition, a Competent Person’s Report (CPR) has highlighted the potential across all of Reabold’s key central and northern North Sea assets, namely: the Inner Moray Firth, East Shetland Basin, and the North West of Shetland. The opportunities comprise a number of play types of both gas and oil with proven potential from analogue fields.

IOG plc said in an operational update in mid-May that first gas from the Blythe H2 well is still expected to commence by the end of the second quarter this year. Production from Blythe H2 will be initially ramped up to safely and efficiently manage the production of the resident pipeline fluids into Bacton, then expected to build up to 30-40 mmscf/d rate post ramp-up, IOG said. The Blythe H1 well is initially planned to be shut in once the H2 well is fully onstream to reduce water production into the pipeline; however, the H1 well will remain available for production, the company added.

Ithaca Energy has signed an agreement with Shell which defines a marketing process for Shell’s 30-percent working interest in the Cambo field in the West of Shetland region. The project could progress to a final investment decision if Shell sells part of its interest or the entire 30-percent stake, Ithaca Energy said. In all sale scenarios, Ithaca Energy would retain at least a 50-percent working interest in Cambo and will remain the operator of the asset.

“Our agreement with Shell represents a meaningful step towards the development of Cambo, the second largest undeveloped field in the UKCS and a key asset in helping maintain the UK’s future energy security. Securing a new owner for Shell’s stake is an important step in Ithaca Energy progressing to Final Investment Decision,” said Ithaca Energy’s CEO Alan Bruce.

“We are actively engaging, in a constructive manner, with the UK government in pursuit of the fiscal stability required to make critical investment decisions that will support the UK’s long-term energy security,” Bruce added. Neptune Energy has received its best environmental, social and governance (ESG) rating to date from Sustainalytics, putting it in the top 3 percent of all global oil and gas companies rated by the organisation.

In its latest ESG rating report, Sustainalytics stated Neptune’s ESG reporting “is in line with best practice standards. It has an executive-level ESG committee responsible for ESG issues. Furthermore, management integrates climate transition risks into the wider business processes,” Neptune Energy said.

In announcing the Q1 2023 results, Neptune Energy said that the Seagull development offshore the UK is close to completion with start-up expected in July. Harbour Energy said in its Q1 results release that as far as capital allocation is concerned, the company reduced UK activity in certain areas due to the Energy Profits Levy (EPL), including partner cancelled programmes at Elgin Franklin and Beryl and rephasing of certain decommissioning activities.

Harbour Energy’s review of the UK organisation is on track to complete in the second half of 2023 and expected to result in a reduction of around 350 onshore positions. This is forecast to deliver annual savings of approximately $50 million from 2024, following an estimated $15 million one-off charge to be taken in Harbour’s 2023 interim financial statements.

Hartshead has completed the farm-out agreement with RockRose Energy for the divestment of a 60-percent equity interest in its UK Southern Gas Basin License P2607. The farm-out materially de-risks the project and provides a clear pathway to full financing and subsequent project development of the previously producing gas fields. A Final Investment Decision (FID) for Phase 1, which includes the redevelopment and drilling of the Anning and Somerville fields, will be taken in the third quarter of 2023, Hartshead said.

Shearwater has been awarded two 4D surveys by TotalEnergies over the Laggan, Tormore, and Edradour fields with an option to extend to the Glenlivet field. The surveys, beginning in May, will last around two months. Diamond Offshore has been awarded a contract for the harsh environment semisubmersibles, Ocean Patriot, Ocean Endeavor, and Ocean GreatWhite in the UK North Sea, the service company said.

Energy services provider Expro has secured a new contract with Harbour Energy for a well abandonment campaign as part of the decommissioning project for the Balmoral area in the UK Continental Shelf. The multi-year contract, valued at more than $20 million, will utilize Expro’s Subsea Well Access technology with a combination of open-water and in-riser applications deployed from a semi-submersible rig.

Saipem has been awarded a contract for decommissioning activities in the North Sea by EnQuest Heather Limited, the Italy-based energy services provider said in the middle of May. Saipem will work on the decommissioning of the Thistle A Platform, around 510 kilometres northeast of Aberdeen, in a water depth of 162 meters. Saipem’s activities entail the engineering, preparation, removal and disposal of the jacket and topsides, with possible extension to further subsea facilities.

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