Oct. 2001 Vol. 222 No. 10  Offshore

Robert E. Snyder,  Editor

Optimizing the North Sea

Offshore Europe 2001, held Sept. 4 – 7 in Aberdeen did a good job of handling some 24,000 visitors from 77 countries, showing off the products and services of 1,600 exhibitors and presenting three days of management and technology sessions, including eight panels and roundtable discussions, plus seven technical sessions with 42 SPE papers. While Norwegians were conspicuous in the exhibition and on some panels, the show certainly stressed the UKCS; and most of the exhibits representing companies headquartered elsewhere were manned primarily by UK staff. That’s OK, Norway will get its chance next year at ONS 2002 in Stavanger.

"Sharpshooting the remaining potential." The keynote session of this title, which opened the conference, set the tone, namely: the UKCS is a mature oil province needing creative technology and management, and the UK is rapidly becoming dependent on imported gas. Both government and industry recognize the problems and a plethora of groups and initiatives have been formed to guide oil/gas activity toward "optimization" and "maximization" of hydrocarbon reserves. What to do when the UKCS no longer serves the UK’s energy needs was the thrust of another panel.

Keynote panelist Brian Wilson, MP, UK Minister of State for Industry and Energy, said the mood of the UK industry is upbeat, compared to two years ago with $10 oil. But there are big issues facing the energy sector. He is chairing a steering group of the Cabinet Office review of national energy policy announced in June – the report is due by year-end. It has been predicted by an industry team that the UKCS could yield a further 56 Bboe, and UKOOA says at least £3.5 billion will be invested this year.

But, his challenge is that industry / government needs to move on the 250 fallow fields and 250 unused licenses. "Unlocking them is crucial. This is a luxury we can no longer afford, and we are entitled to ask for firm plans, or else alternative proposals," he said.

Mr. Wilson noted three exciting new projects to lighten the presentation. Pan Canadian recently discovered the 200 – 300 MMbbl Buzzard field West of Shetland to provide an example of "the right license in the hands of the right players." And he announced approval of two new field developments in the Northern North Sea: 1) Shell’s Penguins Cluster; and 2) Canadian Natural Resources International’s Columba-E "Phase 3" incremental project. Penguin’s 88 MMboe will require Shell Expro’s largest UK investment of £350 million, including a 65-km subsea tieback to Brent C.

Panelist Luke Corbett, Chairman/CEO, Kerr-McGee Corp., described in detail the problems a smaller company faces in licensing / developing acreage in the North Sea. He used the Headon field as a positive example of how a company with specific geotechnical knowledge in an area can make a real difference. He is pleased with the regular series of licensing rounds, but believes sustainability of the basin depends on acceleration of more opportunities. He says current efforts to force fallow blocks into the market are less than effective. And he cites examples from Western Canada, the U.S. Gulf, Western Africa and Brazil where leases must establish productivity or revert to the government – the UK sector is the exception to these models.

Corbett also makes a point about abandonment rules that often force a company to continue operating at a loss, rather than face non-value-creating abandonment. He says a policy is needed that "retains system integrity while striking a balance between need for capital in exploration and need to remove producing facilities."

Sir Ian Wood, Chairman, Wood Group, speaking on behalf of the Industry Leadership Team (ILT) in PILOT, welcomed Minister Wilson’s positive message. He said the UKCS is still a great place to invest. "The level of cooperation between industry and government embodied in PILOT is unprecedented. Investment, technician training, graduate attraction, stimulating exploration, optimizing the value chain, fallow fields and reputation are all being actively worked in the ILT and PILOT," Wood noted.

The final panelist, Lord Colin Moynihan, now Chairman, Consort Resources, Ltd., explained the "gas story" from the UK perspective. He says a DTI report forecasts heavy reliance on UK gas imports by 2020. Two real changes are demand / supply and massive moves in LNG schemes. Maps were shown representing the North Sea with a "Chinese Wall" between the UK and Norway, with only one 6-in. flowline now crossing the border. The reality, he says, is "daunting."

The UK needs to redesign its gas policy. It has to maximize indigenous production – don’t tax it away. It must boost R&D expenditure, address "monopolistic" operator policies, release underdeveloped acreages and penalize those who sit on them. The gas story is a "there’s a crisis tomorrow unless we act."

PILOT – KON-KRAFT Roundtable. As the North Sea matures, industry has been challenged to maximize recovery and improve efficiency, while improving safety and protecting the environment. In the UK and Norway, new relationships and cooperation have developed to do this. PILOT, the successor body to the Oil and Gas Industry Task Force (OGTF), was established in January 2001 to serve the long-term future of oil/gas in the UK.

Norway’s KON-KRAFT is a cooperative body with the overall aim of enhancing competitiveness to ensure attractiveness of the Norwegian CS for investments. It is directed by a top management forum led by the Petroleum and Energy Minister. It concentrates on three main areas: framework conditions, work processes and technology developments. Its first meeting was held on Sept. 5, 2001.

At the Roundtable session, four panelists made presentations on their forums, issues and status; the Schlumberger manager talked about technology.

The charge then for the several "roundtables" was to debate ways to somehow develop the North Sea into a "common entity" for the purposes of optimizing production, area reserves and distribution of same to surrounding areas, including exports of gas and oil. This task seems formidable, considering the dominant position of Norway on exploration potential vs. the mature UK sector; and no clear recommendations came from the tables, that I noted.