UK North Sea Energy Review – October 2022

The new government’s strategy to increase domestic energy production and support households and businesses, the annual economic report for the UK offshore energy, and field development updates were the highlights of the UK North Sea oil and gas sector this past month.

The new UK government is taking the next steps to boost domestic energy production, including by lifting the 2019 moratorium on fracking in England and pursuing the award of more than 100 new oil and gas licences in the North Sea in a new licensing round.  

The licensing round is expected to lead to over 100 new licences, forming part of the government’s plans to accelerate domestic energy supply. Under the new licensing round, which follows the outcome of the Climate Compatibility Checkpoint, the North Sea Transition Authority (NSTA) is expected to make a number of new ‘blocks’ of the UK Continental Shelf available, for applicants to bid for licences. The government also formally lifted on 22 September the pause on shale gas extraction and will consider future applications for Hydraulic Fracturing Consent with the domestic and global need for gas in mind and where there is local support. 

The British Geological Survey’s scientific review into shale gas extraction found that the UK had limited current understanding of UK geology and onshore shale resources, and the challenges of modelling geological activity in relatively complex geology sometimes found in UK shale locations.

“Lifting the pause on shale gas extraction will enable drilling to gather this further data, building an understanding of UK shale gas resources and how we can safely carry out shale gas extraction in the UK where there is local support,” the government said.

The UK is also doubling down on scaling up renewables, nuclear, and lower-carbon energy sources.

“In light of Putin’s illegal invasion of Ukraine and weaponisation of energy, strengthening our energy security is an absolute priority, and – as the Prime Minister said – we are going to ensure the UK is a net energy exporter by 2040,” Business and Energy Secretary Jacob Rees-Mogg said in a statement.

Cuadrilla Resources—the company operating Britain’s only two shale gas wells in Lancashire, which had to stop drilling after the government announced the moratorium in 2019 – welcomed the formal lifting of the ban.

“Communities across the North of England stand to benefit most from today’s announcement. Cuadrilla is determined that a portion of all shale gas revenue should be delivered to local residents as a community dividend,” Cuadrilla’s CEO Francis Egan said.

Commenting on the lifting of the shale gas moratorium, Wood Mackenzie analysts said:

“While there are very few details on the UK’s net export plan, we believe shale gas faces too many political, technical, economic and funding headwinds to make a material impact this decade.”

“Even if drilling were to start straight away, 2023 volumes would be negligible relative to immediate energy issues. With only a handful of wells drilled to date, the exploration and appraisal process could easily run into the latter half of the decade,” WoodMac noted.
Offshore Energies UK, the leading offshore industry body, published in early September its ‘Economic Report 2022: A focus on UK energy security’, which urged the UK’s new government to accelerate investment in North Sea gas, oil, and wind – and reform power markets to ensure fair tariffs. 

The report praised the UK offshore industry’s response to the energy crisis as it has boosted offshore domestic gas production by 27 percent since January.  

The report also cited data from the North Sea Transition Authority, suggesting that the UK continental shelf still contains gas and oil equivalent to about 15 billion barrels of oil. The UK’s total energy consumption equates to about a billion barrels of oil a year so these reserves could support UK energy security for decades to come, with the right investment, OEUK says in the report.

“As we have learned over the last year, energy is a precious resource which must be properly managed, in the short and long term. Our sector has many of the answers and through constructive work with governments and regulators, we can boost the UK economy, cut emissions, secure jobs and most important, heat and power homes and industries with energy produced here, for decades to come,” OEUK said. 

“In practical terms we need the new government to rapidly announce the next round of oil and gas exploration licenses and speed up production approvals,” OEUK’s acting CEO Mike Tholen said in a statement.

“We are also encouraging the UK government’s focus on tariff reform. Right now, our energy markets are being controlled by President Putin who is driving up the price of gas to break ours and Europe’s resolve over Ukraine. We cannot let that continue. We need to move away from a system that allows the price of gas to control the cost of electricity,” Tholen added.

The North Sea Transition Authority has granted the required approvals and consents to Centrica Offshore UK Limited (COUK), for Phase 1 of the Rough gas storage site off the East Coast of England in the Southern North Sea. Centrica has now received all of the required NSTA regulatory approvals to commence gas storage operations. 

The NSTA published on 21 September its latest Emissions Monitoring Report, which showed that North Sea greenhouse gas emissions were cut by an estimated 14.6 percent to 14.3 million tonnes of CO2e last year, adding up to an overall reduction of 21.5 percent since 2018. 

Thus, the North Sea oil and gas industry is on track to meet early emissions reduction targets after posting cuts of more than a fifth between 2018 and 2021, according to NSTA’s analysis.

NSTA projections indicate the sector is on track to meet interim emissions reduction targets – of 10 percent by 2025 and 25 percent by 2027 – which were agreed in the North Sea Transition Deal (NSTD) between the sector and the UK government in 2021.

“However, bold measures will be needed to hit the 2030 goal of halving emissions. Upgrading platforms to run on clean electricity, instead of gas or diesel, is essential – the NSTD will not be delivered without it. At least two electrification projects should be commissioned by 2027,” NSTA said.

In company news

TechnipFMC was awarded a significant subsea engineering, procurement, construction and installation (EPCI) contract by Shell for the Jackdaw development in the North Sea. For TechnipFMC, a “significant” contract is between $75 million and $250 million. The contract covers pipelay for a 30-kilometre tieback from the new Jackdaw platform to Shell’s Shearwater platform, as well as an associated riser, spoolpieces, subsea structures, and umbilicals.

Allseas has been awarded a major decommissioning contract by TAQA UK for the removal and disposal of multiple Northern North Sea (NNS) facilities. The combined weight of the topsides and jackets to be removed is around 114,000 tonnes, making this the single largest offshore UK Continental Shelf decommissioning contract scope to date, Allseas said.

Kistos said in its latest corporate outlook that it expected GLA development and exploration programmes to commence imminently, utilising the investment allowance under the terms of the UK Energy Profits Levy. In addition, the Glendronach development is on track to be sanctioned by the end of this year, with production anticipated to begin by the end of 2024. Kistos is also preparing to drill the 638 Bcf Benriach gas prospect in 2023.  

EnQuest is assessing the potential to use its existing infrastructure and subsea projects expertise to facilitate the electrification of nearby offshore oil and gas assets and planned developments by way of a grid connection supplemented with renewable power, the company said in early September.

“Through our Infrastructure and New Energy business, we intend to repurpose and utilise existing assets to progress new energy and decarbonisation opportunities, including carbon capture and storage, electrification, and the production of green hydrogen,” EnQuest CEO Amjad Bseisu said. 

Tailwind announced on 12 September first oil from its 100-percent operated Evelyn field in the UK Central North Sea ahead of schedule. Evelyn is now producing via the Triton FPSO and is expected to substantially increase Tailwind’s gas production. As part of the same subsea campaign, the project team installed a second subsea production line from its 100-percent owned Gannet-E field, which already produces via Triton. 

i3 Energy plc announced on 22 September the spud of the Serenity appraisal well. The drilling programme is expected to last approximately 30 days. 

Neptune Energy announced the award of a $30 million decommissioning contract to Well-Safe Solutions, for a campaign covering more than 20 wells located across eight Dutch and UK North Sea fields. 

Favourable fiscal and macroeconomic developments have further bolstered interest in Jersey Oil and Gas plc’s ongoing Greater Buchan Area (GBA) farm-out process, the company said on 22 September. Substantial progress has been made, with the majority of interested parties expected to complete their technical due diligence in October 2022, Jersey Oil and Gas added.

bp’s BP Exploration Operating Company Limited has exercised the first of four months of options through 21 December 2022 for the charter of the Safe Zephyrus to continue providing gangway connected operations supporting the Seagull project at the ETAP central processing facility in the UK North Sea, Prosafe said on 22 September.

Petrofac has secured a three-year contract extension for maintenance services from Serica Energy. Under the terms of the agreement, Petrofac will continue with the provision of maintenance execution, maintenance consultancy, and metering services to Serica Energy’s Northern North Sea asset, the Bruce platform complex which processes production from its Bruce, Keith, and Rhum fields.

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