The UK Government plans to take a tough line with oil and gas companies which have held North Sea licences for many years without developing discoveries on the acreage.
This was revealed in Aberdeen yesterday by Simon Toole, director of licensing, exploration and development with the Department for Business.
Mr Toole also highlighted the success of initiatives to encourage new entrants into British waters and the need for a wide mix of oil and gas producers in the area to maximise output.
He told an Oil and Gas UK breakfast attended by more than 400 people that he had taken over the licensing role at the start of this decade and found a licensing system not quite right for companies to be pressurised to fully develop their acreage.
To increase offshore activity, new types of licences – such as frontier and promote – have now been introduced.
Mr Toole added: “We have also been looking at the issue of people hanging on to licences longer than they should. Pressure is now being put on longstanding licence holders to do something on their acreage if nothing has happened within three years. There is probably more acreage under licence now than ever before, with more work being done on it. I believe that almost everything worth looking at will have had proper geological and geophysical work done on it by the end of the period of licensing activity.”
The director said UK waters now had a much better balance of companies – large and small, new and established, home-grown and foreign – than before.
He said Britain needed every sort of player to maximise the offshore potential, adding: “We still need large international companies. They are willing to take risks that others don’t.”
Mr Toole also said that the very first North Sea licences awarded in 1964 were due to expire in 2010 and would have to go back into a relicensing round.
The director said: “Where fields are in production, we will be happy to extend the company licences for that area for production to continue. Where discoveries have been made a long time ago, but no development has taken place, we are unlikely to be that understanding.”
Mr Toole also said that his department would likely want licences back from companies seeking to continue exploring areas they had held for many years without any development having taken place, however, compelling reasons would be taken into account before decisions were made.
The director estimated that the number of licences which could be terminated by the government could be about 100 or more and involved a variety of companies.
Talks with the industry have been continuing for about three months and are expected to continue for another month. Malcolm Webb, chief executive of Oil and Gas UK, said later: “We look forward to discussing the issue further with the Department for Business.
“As a trade association, we support the principle that there should be an extension of licence rights both where there is existing production and where purposeful activity, likely to result in new producing fields in the near term, is taking place.”
Paul Dymond, Oil and Gas UK’s operations director, said that oil and gas production on the UK continental shelf (UKCS) over the past 40 years had already reached 37billion barrels and an estimated 25billion barrels still remained to be extracted.
He added: “This more mature phase of the basin’s life offers exciting opportunities for new companies with different business perspectives and the enthusiasm needed to tackle the challenges of maximising the economic recovery of oil and gas from the UKCS.”
