As we are well aware, the UK oil and gas industry has been hitting the headlines. Right now the focus is on the impact of the falling oil price, a cause for concern in terms of investment and jobs.
Underneath the current headlines, however, are the serious problems our industry has been facing for a number of years including a dramatic decline in exploration, rising operational costs and a substantial drop in production efficiency.
While the rapid fall in oil price has exacerbated these existing problems, we believe there is significant potential for maximising economic recovery of oil and gas from the UK continental shelf (UKCS) through collaborative work between the industry, HM Treasury and the new regulator, the Oil and Gas Authority (OGA).
A concerted focus on measures to stimulate exploration will play a vital role in that process.
The Wood Review, welcomed by both industry and the government as a clear prescription for increasing the international competitiveness of the UKCS, highlighted exploration as an early priority for the OGA.
A lot of work in this area is currently being undertaken by the government industry forum, PILOT.
The PILOT Exploration Task Force (ETF) is driving a number of initiatives aimed at examining how to increase the number of exploration wells drilled and improving the commercial success rate of these activities.
In 2013, for example only 15 exploration wells were drilled compared with 2008 when 44 exploration wells were drilled. There is significant concern that with the fall in oil price exploration will suffer further in 2015.
A key way to tackle these challenges is to ensure the industry has a greater understanding of the UKCS and its subsurface geology. Work in this area is progressing as part of a project known as the 21st Century Exploration Road Map.
Following a scoping study for this project funded by Oil & Gas UK, the Department of Energy and Climate Change (DECC) and the Natural Environment Research Council, two initial studies have been launched.
The overall aim being to demonstrate that the North Sea has significant opportunities that can compete with global prospects.
The first comprises an industry-wide review, led and funded by DECC, to understand the technical reasons preventing successful drilling of exploration wells in the Central North Sea.
On the basis of current understanding, this is an area deemed to hold the largest remaining potential and the study is analysing data gathered over the past ten years from 2003 to 2013 . The aim being to ensure that future wells have a greater chance of commercial success.
The second is a study, funded jointly by DECC and the industry, for which the British Geological Survey is carrying out work to examine the potential for finding oil and gas in Palaeozoic rock on the UKCS.
It is vital that we push forward rapidly on this work when an estimated 12-24 billion barrels of oil equivalent (boe) remains to be extracted from the UKCS.
The Wood Report, for example, noted that the current rate of exploration drilling is totally inadequate to exploit the undiscovered potential of the UKCS within the lifespan of the existing infrastructure.
Alongside the industry’s efforts to stimulate exploration, it is essential that the government takes urgent action on fiscal and regulatory reform which is vital to help secure the next phase of development in the North Sea.
Collaborative work between the industry and the Government will continue to play a key role in our work to revitalise exploration on the UKCS. Oil & Gas UK is actively engaged in conversations with HM Treasury about the possibility of government funding for seismic surveys which will further stimulate exploration.
Timing is critical – we must intensify our collective efforts so we can move quickly to find sustainable and cost effective ways to drill the most promising prospects and make the most of the infrastructure networks still in place.
Oonagh Werngren is Oil & Gas UK’s operations director
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