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West of Shetland takes centre stage

Exploration in the region may lead to the partial revival of the UK Continental Shelf

Oil firms are increasingly putting the West of Shetland (WoS) at the centre of their recovery plans for the UK Continental Shelf (UKCS), marking a major shift from the peripheral role the remote region has played for decades.

There have been only sporadic finds in the Scottish hydrocarbons province since the late 1970s. But momentum has accelerated in recent years, as new seismic and drilling technologies have enabled operators to overcome complex geology, deep field locations and UK environmental legislation protecting potentially sensitive habitats.

A series of discoveries and successful project launches since 2017 has spiked further exploration. This was underscored by the award of 20 WoS licenses in the UK's 31st offshore licensing round in June, and more than 50 in the previous round in 2018, to both majors and independent entrants.

The buzz around WoS contrasts starkly with declines elsewhere on the UKCS

BP—which initially developed the Foinaven, Schiehallion and Clair fields in the 1990s—ramped up its activity in 2017. It invested £3.4bn ($4.4bn) in Schiehallion, which started production last November.

In 2017 it also stated construction on Clair Ridge, a huge, £4.5bn expansion of the Clair field. It came on stream last November and the first two production wells are already producing 36,000bl/d. BP estimates there is 640mn bl of oil in recoverable resources, meaning the volume recoverable using current exploration and production technology, and is targeting peak oil production of 120,000bl/d.

Hurricane Energy also announced in 2017 that its Greater Lancaster Area may contain 1bn bl of recoverable oil; E&P activity led to it securing first oil from the fractured basement field earlier this year.

Cnooc Petroleum Europe, a subsidiary of Chinese state-controlled Cnooc, confirmed plans to spud wells in the region this summer at its West of Shetland fields, Cragganmore and Howick.

But the largest UK discovery in a decade came in late 2018—Total's discovery of a mammoth 1tn ft3 in its Glendronach gas field. Located in the Greater Laggan Area, it can be developed quickly with the existing infrastructure around the Edradour field and the Laggan-Tormore facilities of the Shetland Gas Plant. The field could contribute as much as 10pc of the UK's annual gas production in its early years, according to an appraisal last October by the energy consultancy Wood Mackenzie.

Frontier no more

Ariel Flores, BP North Sea regional president, told Petroleum Economist that technological breakthroughs have been critical to the area's recent successes, and that this will continue to be the case.

"BP pioneered 4D seismic [techniques], [which provided] the keys to unlocking the Foinaven, Schiehallion and Clair fields. We have also been applying new seismic techniques such as WATS [Wide Azimuth Towed Streamer] to improve imaging around volcanic rocks, and using modern interpretation tools," he says.

Flores notes the area is relatively underexplored in comparison to the North Sea and that its prospects were boosted by the UK government modernising its well databases, which are available through the National Data Depository.

North Sea declines

The buzz around WoS contrasts starkly with declines elsewhere on the UKCS; just four exploratory wells were drilled last year, the lowest figure since 1965.

"Our evaluation last year of the yet-to-find potential in the UKCS in mapped regions was 4.1bn bl, and we see 1.1bn of that coming from the WoS," says Nick Richardson, exploration and new ventures manager at the UK Oil and Gas Authority. "In unmapped areas, we found potential hydrocarbon systems of 11.2bn bl, with 4.7bn bl of that coming from the WoS."

WoS appears to be crucial for the region's economic recovery and the UK's future energy security. A recent study by McKinsey Energy Insights estimated that WoS would account for around 30pc of UKCS production and 60pc of UKCS capital expenditures by 2025, up from 2pc and 20pc respectively last year.

However, the consultancy notes that realising this growth will depend on operators being able to maintain the nimble and innovative project delivery that has characterised the recent expansionary phase. Unless breakeven costs can be brought down below $35/bl, operators may simply turn to easier offshore plays in more hospitable climes.

Source: Petroleum Economist
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