North Sea firms will get the chance to claim new territory in the region after the 28th UK licencing round was opened this morning.
High levels of interest are expected in the tender race for licences in the North Sea, despite the new round opening less than two months after the 27th round was issued.
A record number of licences was issued by the in the Department of Energy and Climate Change in November last year, with 219 offers being made – including 21 newcomers to the sector.
“There continues to be extremely high level of interest in North Sea oil and gas, which is unsurprising when there could be as many as 20 billion barrels of oil still buried deep within the seabed,” said energy minister Michael Fallon.
“This new round of drilling for offshore oil and gas will help boost growth, energy security, and jobs in the UK.”
The licencing round will exclude a number of areas on environmental grounds, including around the Moray Firth, although the government said it would not rule out opening them up in future.
The round opens as debate continues in the industry about an impending ‘exploration crisis’ being faced by the UK sector, with analysts warning that 2014 would be a pivotal year for investment in North Sea operations.
Despite record investment in the UKCS last year, industry body Oil and Gas UK has warned that high taxes are discouraging exploration, with a 50% drop of exploration wells being drilled in 2011 that has not yet recovered.
Today the group said they hoped the announcement of the latest licencing round would spark a catalyst for increased exploration in the region – if the right financial agreements were in place.
“Exploration in the North Sea has been challenged in recent years in both the number of exploration wells being drilled and their success rates,” said the group’s operations director Oonagh Werngren.
“Recent data from the Department for Energy and Climate Change demonstrates that in 2011, the UK continental shelf experienced a 50 per cent drop in the number of exploration wells drilled, a number which has so far yet to recover.
“Only 15 wells were drilled in 2013 and less than 100 million boe were discovered in the last two years. Explorers cite access to rigs and equity capital as being the major contributing factors.
“Today’s announcement of the 28th offshore oil and gas licensing round will, we hope, encourage new applicants as well as established companies to explore the basin but industry needs to work collaboratively with HM Treasury and DECC in a tripartite arrangement as outlined by Sir Ian Wood’s recommendations from his Interim Report . We believe this approach ultimately holds the key to the future success of the North Sea.”
Prime Minister David Cameron hinted earlier this week that the next budget could include tax breaks to boost exploration work and safeguard many of the 350,000 jobs the UK oil and gas sector supports.
Firms will have until April 25 to submit their applications for new North Sea licences.
Earlier this week Norway issued a record number of licences for mature finds on the Norwegian Continental Shelf.
See detailed reaction and analysis of the new licence round in tomorrow’s Press and Journal
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