The UK government is banking on innovation, such as horizontal drilling, and new technology to keep the UK self-sufficient in oil until the end of the decade.
The joint government-industry initiative Pilot target is to maintain North Sea production at the equivalent of three million barrels a day and it considers the growth of small innovative operators to be vital to achieve this goal.
Energy minister Brian Wilson last week awarded licences to two industry newcomers, Acorn and Tuscan, to restart production from Argyll, the first UK North Sea oil field to enter production in 1975. Production ceased in 1992, with less than 40 per cent of the oil recovered because it was no longer economic.
But Tuscan and Acorn believe they can use technology that was not available in early 1990s – notably horizontal drilling – allied with early involvement of suppliers to retrieve more of the oil on an economic basis.
Wilson said the licence awards were ‘exactly the kind of investments that we have been aiming for as part of our strategy, working with the industry, to extend the life of the North Sea’.
As the Department of Trade and Industry announced the 20th North Sea Licensing Round later in the day, Wilson said he wanted to ‘get these licences into the hands of companies who are hungry and competitive’. In this round, firms will be invited to bid for 270 blocks or parts of blocks.
The UK Offshore Operators’ Association, which represents the North Sea producers, said there would inevitably be niche opportunities on the UK continental shelf that would not interest companies that had to operate with large-scale overheads.
‘They’re probably not going to go out actively exploring for 30-million barrel fields,’ said James May, UKOOA’s director-general. ‘The DTI is obviously keen to get smaller companies in; the wider the range of skills and opportunities, technical capabilities and interpretative abilities, the better.’
Smaller companies inevitably employ new technologies to make their schemes viable, as with the Argyll scheme. Other operators that have been awarded North Sea acreage recently include Talisman UK, Consort and ATP.
David Ellix, the former Amerada Hess manager who is now managing director of the Industry Technology Facilitator set up under Pilot, said further applications of new technologies would be the key to meeting the 2010 target. He said these would include technologies that cut the cost of developing oil fields.
Horizontal drilling involves drilling into the side of a new well using an old oil platform up to 10km away.
Concerns over reliability
Another technique that would do away with the need to build new platforms is sub-sea separation of oil, gas and water. Rather than bringing the heavy mixture up to the surface for separation, it is possible to pump the separated oil and gas much greater distances across the seabed, theoretically as far as the shore. However, there are still concerns about the reliability of sub-sea separation.
Meanwhile, advances in areas such as seismic imaging would improve the ability to locate oil.
Another reason for the government’s urgency is that many of the small ‘in-field’ accumulations will need to use existing infrastructure to be commercial. Many platforms and pipelines now in use face decommissioning in the next 10 years if no further use for them is found. ‘That’s very much a driver,’ Ellix said.