PESGB March 2017

Wed 01 March 2017

Category: Magazines

  • UK North Sea Outlook, Nick Terrell, PESGB President 2017
  • Deep Marine Gas Hydrates, An Answer to India’s Growing Energy requirements.
  • East and West Africa, Sanctioning needed to fulfil the growth promise

Plus much more inside

UK North Sea Outlook

With the significant cost deflation that we have seen across the industry since the downturn, 2017 is expected to bottom out on costs. A 45% drop in unit operating costs from $29/barrel in 2014 to $16/barrel in 2016 illustrates that this is an excellent time to be capturing these low costs and investing. A quarter of the North Sea rig fleet is cold stacked and a third of rigs do not have contracts secured beyond 2017 according to Wood Mackenzie. This level of utilisation has driven the cost of drilling down sig­nificantly, in some cases more than 50% since 2014.

UK production figures are likely to be up again in 2017, with the Cygnus gas field ramping up and new projects coming on line such as Enquest’s Kraken and BP’s Quad 204 fields.

M&A activity picked up in the second half of 2016 driven by a recent oil price recovery, return in confidence in the sector, the bid ask spread narrowing, major’s rationalisa­tion and innovative deal structuring. Siccar Point’s ac­quisition of OMV’s entire UK portfolio marked a material shift in M&A sentiment as private equity started to move in. This was then dwarfed by Shell’s announcement this year that they have sold a big piece of their UK production portfolio to private equity backed Chrysaor to the tune of $3.8 billion. This will put many of these assets into the right hands. Chrysaor will see investment opportunities in these assets that won’t be material to a player like Shell and Shell can focus on its other key growth projects.

On the exploration side, Hurricane’s positive results at Lincoln, building on the Lancaster appraisal success, is a clear demonstration of the potential of the basement play that Robert Trice and his team have been chasing for some years now. Halifax is currently on location as I write this. This is a bold step out from the recent wells and if successful has significant additional volume potential.

I had the opportunity to attend the PESGB-sponsored Oil & Gas UK Exploration Conference in February. This in­dustry-led one day event (formerly known as the ‘Pitfalls’ conference) is now in its fourth consecutive year and focuses on lessons learned from both failures and suc­cesses in recent UKCS exploration and appraisal drilling. A total of ten case studies were presented from a diverse range of operators which was then followed by an inter­active panel session and debate on conclusions from the day. I was really struck by the quality and openness of the talks, with excellent engagement from the audience and good technical and non-technical discussions.

This is yet again an excellent example of how our explora­tion industry is collaborating together to solve the common challenges that we face. Furthermore, I am encouraged to hear that Norway is planning a similar event this spring.
As part of our highly successful Stoneley Lecture Series we are delighted to announce that our 2017 speaker is Ken Lacovara. Ken will be headlining our GEOLiteracy Festival in April. This will involve a series of national out­reach events hosted across the country aimed at cap­turing the interest of professionals and families alike. Ken has unearthed some of the largest dinosaurs ever discovered, including the massive Dreadnoughtus, and he brings great tales of adventure and technical knowl­edge to his talks. I encourage you to get tickets and bring along young friends and family to enjoy what Ken has to say. This is an excellent opportunity to our youngsters interested in what the subsurface has to offer!

Our busy schedule of courses continues with our very popular London based Carbonates course in March. Aberdeen continues to host our free Surviving the Downturn workshops and social gatherings for members who are currently between jobs. We also have a series of exciting courses and field trips coming up, all of which are relevant to continuing North Sea and global activity. These include John Underhill’s North Sea course in May plus field trips to Somerset and Yorkshire in the summer. We will also be running a new, focused workshop in June entitled, “What geoscientists need to know about devel­opments” which should also prove very useful.

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