Gunthar Newcombe wants to dispel North Sea myths – and he’s not talking about mermaids and other water dwelling kelpies.
The Oil and Gas Authority’s operations director is referring to the view that the mature basin is not worth investing in any more.
In his role, he is targeting the assumptions that the North Sea is expensive, troublesome and simply ‘not worth the effort’.
Forty odd years after first tapping into the region’s reserves, it could be argued that the North Sea is an ageing mistress compared to the more youthful and nimbler global production developments on offer.
But Newcombe claims there is a change in the wind – that the global audience is starting to recognise the profit potential in the UK Continental Shelf.
His first inkling came in May, when he asked the assembled delegates at OTC how many people held the belief that the North Sea was a high cost, low efficiency, low potential basin.
“No one put up their hand,” he said.
“A couple of years ago that was not the view.”
The shift, according to the former geologist, began in 2014 – the edge of the oil price cliff. Oil was $100 a barrel but the Wood Review had highlighted that the North Sea wasn’t competing for capital on a global basis because the operating costs were so high.
That same cost base of circa $30 is now closer to $15 on a boe basis, Newcombe said.
He added: “It’s phenomenal to cut lifting costs by half.
“Production has gone up as well.
“It’s producing over 1.7million barrels a day right now. And part of that has come from the new developments coming on stream, which will have added by 2022 500million barrels a day overall.
“This is on top of the 350,000 barrels that have come from production efficiency.
“So the industry has helped itself get better.”
The phrase ‘open for business’ has become a common refrain in recent years in regards to the North Sea.
Now the sector’s veterans must try and match the pace of its newcomers, according the industry expert.
He said: “We’ve seen change but we think that the pace has to increase.
“You have private equity like Siccar Point Energy going in on stuff with OMV in the West of Shetland in particular. Suncor have deepened.
“Ineos, which is again not a well known upstream operator, buy into the Southern North Sea and then they make a play on the Forties Pipeline System. They are onshore in shale and they are also with Dong’s assets in UK Norway and Denmark.
“Ratcliffe is a pretty canny bloke. I don’t think he wants to put his money somewhere it doesn’t get a return.
He added: “Both BP and Shell are still making quite significant contributions to the UKCS.
“BP are drilling a lot of exploration wells in the Southern North Sea, looking for tight gas. Ravenspurn could be a gamer changer.
“Shell is still looking at Penguins. They are not pulling out. They are just refocusing their portfolio.
“People ask if we are going to rebound to the heady days of 2012 and 2014 where the oil price was at $100. To be honest I hope we don’t, because there will be hyper inflation if we do. We need to have a sustainable steady business that doesn’t have these peaks and troughs.
“Then we push it out for as long as we can.”
Part of that push will come in the form of area plans – also known as joining the North Sea dots.
Newcombe said maximising economic recovery will require re-plumbing the North Sea with collaborative efficiency in mind.
“If you look at a map of the UKCS, and you’re an operator, you can see your own assets and you may have some idea about other people’s assets nearby but you don’t see the whole picture. You don’t have the data and the time.
“But the OGA has all the data, through the stewardship survey.
“We can see where there are certain dots that could join up in a different way.”
The one blocker to this potential black gold mine – collaboration.
Newcombe said: “It does require a lot of cooperation and working together to find the bigger slice of pie.
“We’re trying to drive behavioural change. Fundamentally people need to want it and need to see it in a different way.”
Overall, Newcombe says, the ball has started rolling in the right direction, it just needs a bit of momentum now.
He said: “There’s a light shining on Aberdeen, the greater area and the north-east at the moment.
“This is the first time I’ve ever seen that.
“That is a real indicator of change.”
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