Related Articles
Forward article link
Share PDF with colleagues

Big guns boost UK North Sea commitments

Shell and Equinor have bolstered their offshore presence in the UK, while Total has made a sizeable discovery

Chevron may be divesting its North Sea assets, but other international oil companies are filling the gap, as the allure of the maturing UK continental shelf (UKCS) is kept alive by new discoveries.

Chevron said back in July that it wanted to divest most of its North Sea assets, so the announcement on 1 October that it was selling its 40% stake in the Rosebank project to Equinor wasn't too much of a surprise. The US major is also reportedly in the process of selling its last remaining exploration holding in Norway—a 20% stake in the PL859 license in the Barents Sea—to Norway's DNO.

Equinor, which replaces Chevron as operator of Rosebank, says it hopes to build on its experience of cost-cutting on the Johan Castberg project in Norway, to make the project viable. Lying northwest of the Shetland Islands, Rosebank is one of the UK's largest undeveloped discoveries, with reserves estimated by Chevron at more than 300m barrels of oil equivalent (boe).

The US firm has not developed Rosebank, which lies in 1,110m of water, since it made the find in 2004, fearing it would be too expensive. The acquisition represents a return to the project for Equinor, which, as Statoil, sold its original stake to OMV in 2013. At present, the other partners are Suncor Energy (40%) and Siccar Point Energy (20%).

While Chevron clearly feels its future investments are better made elsewhere, the big European-based players remain committed to the UKCS for now, despite its dwindling reserves. Their interest has been underpinned by the opening up of promising new exploration areas, higher oil prices, lower development costs and financial incentives from the UK and Scottish governments.

Shell takes another FID

Shell has just announced its fourth positive final investment decision (FID) of 2018 in the North Sea with its decision to move ahead with development of the Arran field—the others were Penguins, Alligin and Fram. It is the 11th North Sea FID of the year in total, according to consultancy Wood Mackenzie.

Shell had held a non-operator's stake in the development, but has stepped up to assume operatorship following the exit from Arran of former operator Dana Petroleum in August.

Shell now holds a 44.57% stake in Arran, partnered by Rockrose Energy (30.43%) and Dyas UK (25%). The Anglo-Dutch major says Arran is expected to produce some 100m cubic feet (cf) a day of gas and 4,000 barrels per day of condensate at peak production, which equates to 21,000 boe between them.

Total find buoys explorers

Ensuring the longer-term future of the UKCS will require a stream of new discoveries to whet the appetites of investors. To that end, Total's announcement in late September that it had struck gas in the Glendronach prospect, in the West of Shetland area, is welcome news for the industry.

The well was drilled to a final depth of 4,312 metres in a water depth of some 300 metres and encountered a gas column of 42 metres of net pay in a high-quality Lower Cretaceous reservoir, according to the company. Glendronach is operated by Total (60%) alongside partners Ineos (20%) and SSE (20%).

Total has confirmed that preliminary tests showed good reservoir quality, permeability and well production deliverability, with recoverable resources estimated at about 1 trillion cf. The French firm hopes the discovery, which is located in a formation below the existing Edradour field, can be developed quickly using existing infrastructure for Edradour and the Laggan-Tormore facilities of the Shetland Gas Plant.

Westwood Global Energy, a UK-based consultancy, estimates that 17 exploration wells could be drilled on the UKCS over the next 18 months, testing unrisked resources estimated by oil firms to total more than 2bn boe. Of those resources, more than 1bn boe are located in new West of Shetlands plays, with more than 600m boe in the Central North Sea, according to Westwood's UK Offshore Exploration Performance 2008-17 report.

That is a far cry from the 32 exploration wells drilled back in 2008, though the industry clearly feels there are few big finds still to be made.

Also in this section
Libyan production languishes under ‘illegal blockade’
4 August 2020
National Oil Corporation reports its lowest production since the blockade started in January as external forces gear up for clash over Sirte basin oilfields
Turkey’s ambitions have imperial echoes
4 August 2020
Facing the challenge of a domestic economic crisis, President Recep Tayyip Erdogan hopes that successful military interventions in the surrounding region will foster nationalist solidarity
Bolivian election delay further dampens gas investment appetite
31 July 2020
The Andean country’s natural gas sector will be a casualty of a second vote being pushed back yet again