Inform Prize Cegal magazine 2024 events 2024 events Inform prize
UK North Sea Energy Review - July 2024

UK North Sea Energy Review - July 2024

 

The general elections and the new government’s vision for the UK’s energy future dominated headlines in the UK North Sea oil and gas industry in recent weeks.

Following the landslide Labour win in the 4 July election, Offshore Energies UK said it is committed to working with the new government on the next steps to a homegrown energy transition, to safeguard energy security, jobs and skills, and create a favourable investment environment in the UK.

However, the largest offshore industry body warned that “many of the industry’s skilled people and investors remain deeply concerned about Labour proposals for a further windfall tax on home grown oil and gas production and to end new oil and gas licences in UK waters.”

According to the industry association, such measures would not create the investment conditions the UK needs to deliver the homegrown energy transition needed to kick start economic growth.

“The Labour party has put economic growth at the heart of its plans, and our offshore energy sector can deliver just that,” said David Whitehouse, Chief Executive of OEUK.

“UK offshore energy companies could invest £200 billion in homegrown energy production this decade alone in carbon storage, hydrogen, and wind opportunities alongside the homegrown oil and gas we all need.”

Whitehouse continued, “The people in our sector and investors remain deeply concerned over Labour proposals to impose a further windfall tax and end new licences. These policies, if poorly managed, and without industry input will threaten jobs and undermine the decarbonisation of the UK economy.”

“We need the new Labour government to follow through on assurances to work in partnership with the sector, listen to our skilled people, and ensure no one is left behind in the UK’s energy transition.”

A day ahead of the election, OEUK said that if the new government gets it right, “Decarbonisation of the UK economy can be one of the greatest opportunities of our time, with the potential to create wealth across every community in the UK.”

The new Energy Secretary Ed Miliband set out his priorities for the department after he was appointed as the Secretary of State for Energy Security and Net Zero.

“Our department will be at the heart of the new government’s agenda, leading one of the Prime Minister’s 5 national missions, to make Britain a clean energy superpower with zero carbon electricity by 2030, and accelerating our journey to net zero,” Miliband said.

The new energy secretary’s priorities include: delivering the goal to boost energy independence and cutting bills through clean power by 2030, taking back control of the UK energy with the creation of Great British Energy, upgrading Britain’s homes and cutting fuel poverty through our Warm Homes Plan, and standing up for consumers by reforming our energy system. The other two priorities are creating good jobs in Britain’s industrial heartlands, including a just transition for the industries based in the North Sea, and leading on international climate action, based on the UK domestic achievements.

In a report in June, OEUK said that UK energy production is at a turning point which could have a decisive impact on the nation’s future economic growth.

With supportive policy, capital investment in offshore energy could rise by over 50 percent, from £13 billion last year to more than £20 billion by the early 2030s, according to the new Economy & People 2024 report from OEUK.

This investment is crucial for achieving the UK’s net zero goals and securing energy supply, the industry body said.

Offshore energy sector employment is estimated to increase by nearly 50 percent to 225,000 jobs by 2030, the report found.

Currently, the sector supports over 150,000 jobs directly or indirectly, with almost 80 percent of these in oil and gas. Additionally, the oil and gas industry alone contributes approximately £25 billion to the UK economy, supporting 1 in every 160 jobs nationwide, and around 1 in 30 jobs in Scotland. The sector has also paid £450 billion in production taxes over the past 50 years, OEUK said in the report.

“Our report shows that the offshore industry could invest £450bn in UK energy by 2040. The path to success is a homegrown energy transition that puts people at the heart of it, builds on our industrial strengths and drives collaboration across sectors,” OEUK’s Whitehouse said, commenting on the report.

The North Sea Transition Authority (NSTA) said in early July that the Annual Consents Exercise (ACE), which sets limits on North Sea flaring and venting and helps to improve the UK’s energy position, had got underway.

NSTA aims for all consents to be issued by 13 December 2024.

Consents set minimum and maximum production limits for each field, and ensure, among other things, that reservoirs are appropriately managed and support the drive to net zero and the management of UK resources.

An enhanced digital system is expected to streamline the process for applicants and communication with NSTA, the authority said.

‘Energy patriotism’ could slash UK homes’ foreign energy dependence by 80 percent, while new North Sea oil and gas would be ‘largely irrelevant’ for Britain’s energy security, Energy & Climate Intelligence Unit said in a report published in late June.

For UK households that predominantly use fossil fuels, energy imports are set to rise further by 2030 and beyond, as UK production of oil and gas declines, irrespective of new licences, the report found.

“The only way that households can become less reliant on imported energy and boost their use of UK energy is to adopt technologies that cut oil and gas demand – primarily energy efficiency, electric heat pumps and electric vehicles,” the authors of the report wrote.

 

 

In company news

Deltic Energy Plc said it was unable to secure a farm-out or an alternative funding solution for its Pensacola stake and said the only appropriate course of action available to it is to withdraw from the licence prior to further liabilities being crystallised.

Deltic Energy cited deteriorating sentiment towards the oil and gas industry as a result of ongoing fiscal volatility and negative political rhetoric in the run-up to the July election as contributing to its inability to secure funding for its share of the Pensacola licence operated by Shell.

Separately, Deltic Energy announced in July that it had accepted one of the two licences that were provisionally awarded by the NSTA in Tranche 3 of the UK’s 33rd Offshore Licensing Round. Licence P2672, in which Deltic has a 100-percent working interest, is located immediately to the west of the West Sole gas field and contains the Pharos and Teviot discoveries. Deltic’s preliminary evaluation, completed as part of the application process, has resulted in an updated understanding of the structural setting, which suggests that the Pharos discovery and the Blackadder prospect are in fact a single Leman Sandstone structure, the company said.

Subsea7 has been awarded a sizeable contract – between $50 million and $150 million – by Dana Petroleum, for the Bittern field development 190 km east of Aberdeen in the UK Central North Sea, at a water depth of 90 metres.

The contract scope includes project management, engineering, procurement, construction and installation (EPCI) of a 22-km 12” water injection pipeline. Subsea7’s scope also includes associated subsea structures and tie-ins at the Triton Floating Production Storage & Offloading (FPSO) vessel and the Bittern field.

TotalEnergies has signed an agreement to sell to The Prax Group its entire interest in West of Shetland assets in the United Kingdom. These include Laggan, Tormore, Glenlivet, Edradour, and Glendronach fields, the onshore Shetland Gas Plant, and nearby exploration licenses. These mature assets currently produce about 7,500 barrels of oil equivalent per day in TotalEnergies’ share, made up of around 90 percent of gas.

The sale of the West of Shetland assets is in line with TotalEnergies’ strategy to adapt its portfolio by divesting mature non-core assets, said Jean-Luc Guiziou, Senior Vice President Europe for Exploration & Production at TotalEnergies.

“TotalEnergies remains committed to the UK through both its upstream portfolio in the North Sea (Elgin-Franklin, Culzean and Alwyn fields) and its Integrated Power and Renewables portfolio,” Guiziou added.

Serica Energy’s chairman David Latin criticised the UK’s energy profits levy and the uncertainty for operators in the UK North Sea during his speech at the Annual General Meeting at the end of June.

Commenting on the macro issues facing UK North Sea producers today, Latin said “I have been involved in this industry for more than 30 years and have worked all over the world. Other than when I was responsible for a company which had significant assets in a war zone, I have never encountered a situation which was so challenging when it comes to making investment decisions, and planning for the future more generally, as it is in the UK at present.

“Without continued investment in our homegrown oil and gas sector, the gap between UK production and consumption will only widen, to be filled inevitably by imports,” the executive added.

THREE60 Energy said it would buy subsea engineering company Samphire Subsea in a deal that will enhance THREE60’s range of capabilities across the energy services industry.

“Combining Samphire’s expertise in subsea engineering and project management with our proprietary subsea flexibles and riser technology offers the opportunity to better support our increasing subsea customer base across offshore oil and gas, the maturing decommissioning and the growing renewables industries,” said Walter Thain, Group CEO of THREE60 Energy.

Prosafe has announced that it has been issued a Letter of Intent (LoI) from Ithaca Energy for the charter of the Safe Caledonia to provide gangway connected accommodation support at the Captain field in the UK North Sea. The firm duration of the contract commencing June 2025 is six months with up to three months of options and final contract award is subject to meeting certain site specific technical criteria.

“The reactivation and commitment of the Safe Caledonia reflects the continued tightening of the accommodation market in the North Sea and globally,” Prosafe chief executive officer Terje Askvig said in a statement.

 

Read the latest issue of the OGV Energy magazine HERE

Published: 09-08-2024

OGV Energy will use the information you provide on this form to be in touch with you and to provide updates and marketing. Please let us know all the ways you would like to hear from us:

OGV Magazine 83 wellpro