Blog & News

May 2016 President's Page

Thu 21 April 2016

Category: President's Page

A World of Exploration

Colin Percival - invisibleExploration and appraisal activity on the UKCS has been extremely low so far in 2016. Until early 2014, there were typically 8-12 exploration and appraisal wells active at any one time on the UKCS. In late 2014 this dropped to around 6, and by year end 2015 this was down to around 2 or 3, and these were generally HP/HT wells which were at least a year in planning and therefore sanctioned in a very different oil price world. As these HP/HT wells sanctioned at ca. $100 bbl have been completed, the E&A well count has dropped even further. Indeed as of late January, E&A activity had dried up completely, with no active E&A wells on the UKCS. This is the first time I can recall this happening on the UKCS and the expectation is that 2016 will see only ca. 16 exploration and appraisal wells drilled. Indeed the first spud of the year took place on 7th March and ended the longest gap between E&A well spuds since exploration began on the UKCS in 1964.

The Chancellor announced tax breaks the for UK Oil and Gas Industry in the 2016 Budget; effectively removing PRT and reducing the Supplementary Charge from 20% to 10%. These changes are welcome, and although they make little difference in the short term, as few companies are paying tax, they deliver a more positive message about future investment in the North Sea when oil and gas prices improve. The 2016 Budget also included a further £20 million of funding for new seismic acquisition on the UKCS. This follows on from the initial £20 million which was spent on new 2D over Rockall and the Mid North Sea High/Forth Approaches areas which has recently been released free to industry in time for the 29th Licensing Round. The current plan is for the second £20 million to be spent on 2D covering the South Western Approaches, St. Georges Channel and Cardigan Bay areas. Acquisition will take place this year with final data delivery by end March 2017.

Looking outside of the North Sea there have been notable recent exploration successes in Egypt (Zohr), Mauritania (Tortue/Marsouin), Turkmenistan (Bagly), the Falkland Islands (Isobel) and Guyana (Liza) to name a few. Cairn has also confirmed a world class light oil discovery offshore Senegal, an area written off until very recently, as the Cretaceous source rock was thought to be immature except locally around igneous intrusions. East Africa continues to deliver as does deepwater Brazil. Many of these significant discoveries have come from areas which were deemed moose pasture until relatively recently. However, someone out there was brave enough to challenge the conventional wisdom, and perhaps more importantly to garner the financial support to prove this was not the case. Of course it is important to focus on high grade opportunities, but it’s also important to remember that our picture of the subsurface is far from perfect and there are a lot of unknowns. Predicting failure in the exploration business is very easy, whereas delivering success is much more of a serious challenge. It requires persistence and belief as there will inevitably be some dry holes along the way. Dry holes are hard to take at the best of times, but a low oil price world leads to severe risk aversion when it comes to taking a drilling decision. In a world full of bad news, who wants to spend money on finding some more bad news!

May sees the DEVEX Conference being held at the AECC in Aberdeen on the 18th & 19th May. Places are for the first time free, but numbers are currently limited to 300. All 300 places were taken up within 2 hours of registration opening. Hopefully this number will increase if additional sponsorship can be found. Please make sure you utilise your place if you are fortunate enough to be allocated one. Also coming up is a two-day conference on the 30th June -1st July 2016 at the Geological Society London entitled: Preserving and protecting your geological assets in a time of crisis? Registration is now open online.

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