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UK North Sea Oil & Gas Review

UK North Sea Oil & Gas Review 

 

As we rolled into the New Year, companies operating in the UK North Sea announced updates on several projects and analysts and associations issued some end-of-year reports or forecasts for what is in store for the North Sea in 2019.

Exploration in the North Sea is making a comeback this year, energy consultancy Wood Mackenzie said in early January. The five major developments to watch in the North Sea this year are: exploration is back; some big transactions are likely to take place; a new wave of projects is expected; production will remain stable; and uncertainty looms, according to Neivan Boroujerdi, senior analyst for North Sea upstream at WoodMac.

Exploration is back in the UK, after having languished in 2018 with just eight wells completed—the lowest number since the 1960s.

“We expect the UK sector to see between 10-15 wells this year. Siccar Point’s Blackrock and Lyon wells in the West of Shetland are the ones to watch. Both are high risk but have standalone potential,” Wood Mackenzie stated.

Although deal spend could slow, there will still be some big transactions, and the majors will be the big sellers, according to WoodMac.

Investment will increase thanks to a wave of new projects, with the UK North Sea investment seen at US$7 billion in 2019. As confidence returns to the sector, WoodMac expect another bumper year for North Sea final investment decisions (FIDs), with 23 potential project sanctions, including 12 in the UK.

This year production in the North Sea including the UK, Norway, Denmark and the Netherlands  will remain stable as start-ups and ramp-ups will offset declines from legacy producers. The key projects to watch in 2019 include Total’s Culzean and Equinor’s Mariner in the UK North Sea, as well as the giant Johan Sverdrup in the Norwegian part of the North Sea.

Production in the UK North Sea is expected to increase by 4 percent in 2019, with first production at Mariner, Lancaster, and Culzean, three of the year’s seven start-ups. Culzean will play a significant role in UK gas supply, delivering 5 percent of demand, WoodMac says.

Yet, there could be uncertainty ahead, with Brexit and the possibility of a global economic downturn, the energy consultancy noted.  

Commenting on WoodMac’s report on the North Sea, Mike Tholen, Oil & Gas UK’s Upstream Policy Director, said:

“We have already seen the sector delivering improved performance, securing more project approvals in 2018 than in the last three years combined. Our challenge is to build on our successes to generate increased exploration activity.”

In December, Oil & Gas UK and Deloitte published the UKCS Upstream Supply Chain Collaboration survey 2018, which showed that trust, technology, and transformation are the keys to increase collaboration between suppliers and operators in the UK Continental Shelf (UKCS).

“Effective collaboration should not be forgotten when oil prices rise and the industry gets busier; this will only lead to a reversal of the efficiency gains of the last three years,” said Graham Hollis, senior partner for Deloitte in Aberdeen.  

In projects and deals, several companies provided updates on their plans and signed contracts.
Subsea 7 announced in December that it had been awarded a sizeable contract by Shell for the Shearwater Fulmar Gas Line (FGL) Re-Plumb Project, 140 miles east of Aberdeen. The engineering, procurement, construction and installation (EPCI) project scope includes a 37-km export line, a 14” rigid riser, control jumper, subsea structures, and associated subsea tie-ins, said Subsea 7, whose definition of a ‘sizeable contract’ is one worth between US$50 million and US$150 million.

i3 Energy plc, an independent oil and gas company with assets and operations in the UK, provided several project updates in December and early January. i3 Energy said in early December that it had been assessing a structure in the northern portion of its 100-percent owned Licence P.2358 Block 13/23c, which it calls the Serenity prospect.

“The Serenity prospect provides significant organic growth potential to i3 beyond our plans for the Liberator development and demonstrates the quality of the licence we acquired in the 30th Round,” said i3 Energy’s CEO Majid Shafiq.

Referring to Liberator, i3 Energy said later in December that it expects to enter the final authorisation phase of the OGA’s FDP planning and consent process in Q1 2019 and continues to prepare for mid-2019 development execution with Liberator Phase I first oil expected in mid-2020.

In an operational and funding update to the market on 10 January, i3 Energy said that it had entered into a Rig letter of Intent (LOI) with Dolphin Drilling Limited for a three-well appraisal and development drilling programme to be conducted in the summer of 2019. i3 will first drill the A3 appraisal well in Block 13/23c (Liberator West), then drill and suspend the first Liberator Phase I production well in Block 13/23d (L2), and complete the campaign by drilling the S1 well into the Serenity prospect.

i3 also proceeds with a farmout process for a joint venture and is working with lenders in the UK and North America to secure funding of up to US$130 million, up to 25 percent of which would be available towards i3’s 2019 appraisal and development drilling. The balance will be drawable for the residual 2019/2020 Liberator Phase I production wells, subsea installation and field tie-in.

Petrofac has won a construction and commissioning contract with Ithaca Energy (UK) Limited of around US$10 million, under which Petrofac will be responsible for the topsides construction and commissioning works on the Ithaca-operated FPF-1 floating production facility, for the tieback of the BP-operated Vorlich field subsea development in the Central North Sea.

Specialist drilling waste management company TWMA has secured a seven-figure contract with Neptune Energy for skip and ship and solids control to manage and process drill cuttings. The contract is for three years, with an option of a two-year extension, TWMA said in December.

Energy services group THREE60 Energy said in late December that it had acquired Aberdeen-based North Sea Construction and Commissioning (NSCC) for an undisclosed sum. The acquisition marks the fourth company to be added to THREE60 Energy in twelve months, following the investments in LEAP Energy, Step Change Engineering, and Ridge AS.

“The wider integrated offering, across the THREE60, will enable us to provide an enhanced service in field development, and lean EPC delivery,” said Iain Macdonald, Managing Director of NSCC.  

Independent Oil and Gas plc (IOG), a development and production company aiming to become a substantial UK gas producer, said in January that its two-phase Core Project has been expanded to include the 108 BCF of 2C Contingent Resources assigned to the Goddard discovery by ERC Equipoise.

“At the outset of 2019, our focus is to deliver funding for Phase 1 of our Core Project thereby reaching FID at the earliest opportunity. We are technically and commercially prepared for project execution having made a head start on relevant offshore site surveys,” said Andrew Hockey, CEO of IOG.

Premier Oil said on January 10 that after it had sanctioned the 500 Bcf Tolmount Main gas project in August, the high value Tolmount East appraisal well is scheduled to spud in mid-2019. Construction of the platform began in Rosetti Marino’s Ravenna yard in December. First gas at Tolmount remains on schedule for the fourth quarter of 2020, Premier Oil said.

 

By Tsvetana Paraskova

Published: 29-01-2019

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