New oil and gas fields will spur UK energy revival

09 April 2013

By 2017, Britain's North Sea oil and gas production is forecast to rise to around 2 million barrels of oil equivalent per day (boepd), up from 1.55 million in 2012, according to trade organisation Oil & Gas UK. This is still far below the 2.7 million boepd achieved in 1999, but represents a welcome bounce-back for the industry and UK economy.

Although output is expected to decline another 3-6 percent in 2013, it will rebound by almost a third by 2017 as some 50 oil and gas fields start production on the United Kingdom's Continental Shelf, industry body figures show.

By 2017, Britain's North Sea oil and gas production is forecast to rise to around 2 million barrels of oil equivalent per day (boepd), up from 1.55 million in 2012, according to trade organisation Oil & Gas UK said, but still far from the 2.7 million boepd achieved in 1999.

Industry experts say sustained oil prices of above $90 a barrel since the end of 2010 have made it possible to go after reserves that are smaller or more difficult to access. New technology to boost recovery rates has also been vital.

EnQuest's Alma/Galia project, which is expected to begin producing in the fourth quarter of 2013, illustrates how new owners can extend the life of fields that are too small to be of interest to the oil majors.

This will produce 20,000 boepd at its peak, revitalising Argyll, the UK's first producing field. Argyll has been decommissioned twice due to the difficulty of extracting the remaining reserves, estimated at 34 million boe.

BP's Kinnoull, which contains an estimated 45 million boe, should start feeding oil into the Forties pipeline this year, enabling the Andrew platform to remain in production to 2020 and beyond.

BP's development of Clair Ridge where the use of low-salinity water injection will unlock assets that have lain dormant since the field's discovery in 1977. Extracting the oil has proved tricky because of the geology, but BP's LoSal technique forces the crude to separate itself from the rock.

This will allow 640 million barrels of recoverable oil to be tapped and extend the life of the field to around 2050. BP is now looking at a potential third development phase.

This new lease of life for the North Sea, which has produced oil for four decades, follows a 30 percent fall in UK production from 2010-2012 due to problems at Total's Elgin-Franklin and Britain's biggest oilfield Buzzard, operated by Nexen.

"In the last couple of years we saw a lot of fields come offline because unreliability and unanticipated shutdowns had just grown to such an extent where it was intolerable," said Mike Tholen, economics and commercial director at Oil & Gas UK.

Between 2011 and 2012, this amounted to a loss of 1.2 billion barrels worth over $120 billion if an average oil price of $100 per barrel is taken. Tholen said major works were now being undertaken to improve the reliability of fields.

China's CNOOC, which has taken over Nexen, is fixing the Buzzard field. And China's Sinopec is helping Talisman Energy boost production at its Montrose/Arbroath field, where output had declined 14 percent per annum between 2010 and 2012 against a background of rising operating costs.

Talisman's £1.6 billion project to redevelop Montrose takes advantage of tax breaks for older fields to encourage investment. Increased certainty around the tax treatment of decommissioning liabilities is also attracting new operators.