Happy with LARRY?

The 29th UKCS Licensing Round is expected to be announced soon and will be the first to be held by the new Oil and Gas Authority. Companies in the UK will be forming bidding groups, agreeing budgets, buying data and evaluating opportunities all within 90 days. All will be busily looking at the Government-funded 2D seismic over Rockall and the Mid North Sea High/Forth Approaches which the round is focused on, and some will be looking at the additional acreage included over the East Shetland Platform. Many will be trying to remember what the recent BGS study on the Palaeozoic concluded, as they sift through the report to jog their memory. Others will already know what they want to bid on, and probably have their applications already written. Happy days entering the applications into LARRY (the Licence Applications Repository), getting your debit card blocked by the bank for too many significant payments to the same account on the same day, and finally having your interview with OGA after your flight has been delayed due to a security alert caused by someone leaving their luggage in the toilet. At least it focusses the mind! Fortunately the march up Victoria Street armed with a sack full of applications is a thing of the past, as is failing to bring enough copies of Appendix X on the day.

The 29th Round will be a bit different from recent licence rounds, in that the focus is on frontier areas, so bids will be more about acreage evaluation than firm drilling commitments. This is particularly so, given the current downturn in the industry where companies are struggling to get drilling funds for prospects they already have on their books. In this context, it is very difficult to justify acquiring new acreage, particularly if it will not deliver positive results or even better still, positive cash flow for many years. The industry is focused on eliminating discretionary spend unless it delivers positive cash flow extremely quickly. This means that activity such as workovers and infill wells trumps exploration drilling virtually every time. Next year’s reserve and contingent resource bookings are next year’s problem, which we will worry about once we survive this year. However, some companies can take a slightly longer term view, and others are focused purely on exploration and see the current situation as a window of opportunity with limited competition and low entry costs. For these companies the 29th Round provides an opportunity to pick up acreage now, without expensive drilling commitments.

The Oil and Gas Authority have introduced a new more flexible type of licence, the Innovate Licence for the 29th Round. This is a very welcome addition, as it will allow companies more control over the length of the initial term of the licence and the phasing of expenditure and commitments. In addition the financial capacity and competency tests are deferred until there is commitment to offshore operations. This is a big step forward and combines the best of the previous types of licence into one more flexible form. The Oil and Gas Authority are to be congratulated for introducing this new type of licence.

The PESGB are planning two field trips focused on the 29th Licensing Round. One will be to Skye from 1-4th October to link in with the geology of Rockall, and the second will be to north east England to look at the Permian and Carboniferous sequences to assist in the evaluation of the acreage immediately offshore in the Forth Approaches/Mid North Sea High area. Places are limited on both trips, so please do book early if you want to see the closest outcrops to the offshore sequences.

This year will see PETEX held at ExCeL in London from 15th to 17th November. With finances stretched in the Oil and Gas Industry, and many companies having travel bans in place, it will be a challenge to repeat the high level of attendance and the success of the 2014 event. PETEX 2016 has a very strong technical programme and provides an extremely valuable and low cost training and networking opportunity. In terms of value for money it will be a hard event to beat in 2016 for UK based personnel. The society and PETEX committee are working tirelessly to ensure the success of the event, and trying to be as flexible as possible in ticketing and pricing to ensure a high level of attendance. Consequently I encourage you to sign up for what will be the highlight of the 2016 UK calendar.