UKCS Offshore 29th Licensing Round: Companies look to extend their acreage positions
On the 23rd of March 2017, the UK Oil and Gas Authority (OGA) awarded 25 licences across 111 blocks to 20 companies as part of the 29th Licensing Round. This is the first licensing round since the OGA became a separate entity from DECC. And it’s the first round in two decades to focus only on under-explored, frontier parts of the UKCS .1
We reflect on who was awarded what and what this means for exploration in the UK:
- Established players show their commitment to the UK. BP, Shell, ExxonMobil and Statoil, all applied for and were awarded licences. BP and Statoil came out as the ‘winners’ of the round, being awarded equity in seven and six licences respectively. Three of these licences have a firm well commitment. This equates to one fifth of the total number of exploration wells drilled in 2016. It demonstrates the continued commitment from players such as BP, who “intend to be present in the North Sea for many decades to come”2.
- Just under 50% of operatorships went to new and small independents. 12 of the 25 licences were awarded to small independents or new entrants. In total, there were four new UKCS offshore entrants; three completely new to the UK (North Sea Natural Resources, Decipher Energy and Draupner Energy), and one (Horizon Energy) who had previously only held onshore UK acreage.
- The OGA encouraged interest in the run-up to the 29th round with the release of new and legacy seismic data. £20million was invested in total in new seismic in the Rockall and Mid North Sea High along with the subsequent release of 40,000 km of new and reprocessed data1. Although it’s difficult to quantify the exact impact on the 29th round, the data will have supported technical understanding in a region that previously suffered from sparse seismic coverage and helped build confidence in the pre-round evaluation work.
- Around 70% of the awarded acreage is next to or nearby acreage already licensed by companies. Despite the 29th round focusing on frontier areas, many companies have chosen to focus on their ‘core areas’ – areas where they own acreage and have a robust know-how of the hydrocarbon system. For instance, Statoil were awarded five licences around the border between the Northern North Sea, Moray Firth and East Shetland Platform Basins, in Quads 8, 9, 15 and 16. It’s an area where they already have a strong presence; with equity in 14 existing licences3across the 4 quads. And Centrica has successfully re-applied for acreage that they’d previously relinquished in 2015 (P1828 – partnered with GDF Suez and Atlantic Petroleum), which is also adjacent to two of their existing licences, P2126 and P2270.
- The majority of awarded acreage has been recycled from previously awarded and relinquished acreage. All but five licences are covered or partially covered by previously licensed acreage, relinquished from 2014 to now. It’s testament to the importance of looking back and re-visiting what others have done using new approaches, ideas and techniques to unlock the untapped potential of an area. For instance, Simwell was awarded acreage previously held by Oyster (P1957) in which, according to the published relinquishment report, they had identified prospectivity that could benefit from regional interpretation.
- Just over half of licences are awarded to a single, 100% equity holder. There are some obvious benefits to this, including faster decision-making and lower levels of misalignment. However, it also comes with a number of challenges. Companies have sole responsibility for the risks and costs of exploration and don’t have the benefit of sharing ideas and approaches between peers.
- All licence awards are now based on the ‘Innovate Licence’ model. This essentially means that the work obligations and commitment timeframes are ‘tailor-made’ to a specific licence. The increased level of flexibility should improve the chance of each company fulfilling their obligations and remove the chance of licences being relinquished because of timing or logistical constraints.
All in all, the 29th round successfully demonstrates that interest in UKCS offshore exploration remains; with a healthy mix of both young and established companies making new commitments, despite the low oil price. Measures implemented by the OGA, including new seismic releases, a new licence model and improvements in the accessibility of public data, no doubt helped.