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United Kingdom looks to fast-track oil and gas development to bolster national, European security A new government task force is working to improve the region’s competitiveness and reduce the cost of operating in the UK continental shelf Derek Brower, London Special to PNA
American politicians aren’t alone in their concern over the security of the energy supply. In the European Union, September’s terrorist attacks, and their connection to the volatile politics of the Middle East, served as a reminder of the precariousness of the continent’s dependence on Persian Gulf oil.
For the United Kingdom, the European Union’s largest oil producer, dwindling oil reserves mean that the economy could also soon be dependent on oil imports from the Middle East and beyond — an unpalatable truth for many.
According to Neil Thomas, an analyst at the oil and gas consultancy, Wood Mackenzie, United Kingdom energy demand will outstrip production within five years. “The UK already imports gas during the winter,” he said. “But we’re not net importers of oil and gas yet. That’ll come in about 2005 or 2006.”
The government hopes the fateful day will be further off than that. Measures it introduced in the last year aim to maintain United Kingdom continental shelf production through to 2010 at 3 million barrels of oil equivalent per day. Alongside that, the government wants to sustain investment in the sector at £3 billion ($4.3 billion) per year.
Development of acreage key The energy minister, Brian Wilson, has made clear that the key to reaching — or even exceeding — the targets, is ensuring the companies get busy developing their acreage in the United Kingdom continental shelf.
“The message must be that the more we produce from our own resources, the less we will depend on other sources,” he told a United Kingdom oil industry gathering in Aberdeen early in September.
The problem is that a lot of companies haven’t been as active as the government would like, particularly in the “fallow” fields — undeveloped acreage — of the North Sea, where Wilson wants faster development.
The government says there are currently 250 such fields and 200 unused licenses. “Licenses should be in the hands of companies that want to develop them,” said Wilson. “Hundreds of fallow fields and unused licenses are a luxury which we can no longer afford. At this stage in the life cycle of the UKCS. I think we are entitled to ask for firm plans or else alternative proposals.”
The government hopes to pass on some of the urgency to companies interested in licensing in the United Kingdom continental shelf, particularly in the West of Shetland area, which Wilson claims offers “world-class potential.” Development of the frontier should, however, be alongside continued work on the “mature” areas, said Wilson. The 20th licensing round at the end of the year, he added, would likely include areas in the Central, Southern and Northern North Sea.
Task force to increase area’s competitiveness In response to the government’s complaints about unused licenses, oil and gas companies operating in the North Sea say they are interested in getting more acreage in production but are prevented from doing so by a cumbersome permitting process.
The government has responded by developing a new task force called “Pilot,” which is tasked with reducing the costs of operation in the UK continental shelf and examining initiatives aimed at improving the region’s competitiveness.
Pilot is responsible for increasing development of the UK continental shelf, in particular achieving the government’s ambitious targets for 2010.
Wilson has also promised to soften royalties terms, however, nothing specific has been proposed by the government.
Investment looks feasible Securing the necessary upstream investment to meet the government’s targets for 2010 looks feasible.
The United Kingdom continental shelf is feeling the effects of the companies’ swollen capital expenditure budgets: the United Kingdom Offshore Operators Association predicts that this year alone investment will be at least £3.5 billion.
The government hopes future investment takes the shape of BP’s development of the 5 billion barrel Clair oilfield, which the British major announced earlier this month (see brief on page 1). Most observers predict, however, that the £650 million project, from which BP hopes to produce 60,000 barrels of oil per day and 15 million cubic feet per day of gas, will be the last of its size in the United Kingdom continental shelf.
Wilson welcomed the project as confirmation of the government’s “fallow field” policy, adding that several more projects had already been approved.
Editor’s note: Freelance writer Derek Brower of London is a contributor to the Petroleum Economist, where he has been a senior staff writer covering the Middle East, Latin America, the European Union and Eastern Europe. He is working on a Ph.D.
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