Oil production in the U.K. isn’t dead just yet, as BP strikes a deal with Baker Hughes and Norway's Oldfjell Drilling to enhance production at the Clair Ridge heavy oil field following recent challenges to production.
BP will use the latest technologies and expertise from this new partnership to boost drilling in 7 billion-barrel Clair Ridge, the U.K.’s largest oil field. Initial aims include increasing output by 15 percent annually.
The Clair Ridge oilfield, which consists of two bridge-linked platforms, was developed in 2018 at a cost of $10 billion, with a projected output of 120,000 bpd of oil. Clair had an expected shelf life of around 40 years but hit production challenges last year, meeting only a third of its anticipated output levels in 2020.
BP operates the oilfield with a stake of 28.6%. Shell, ConocoPhillips and Chevron all also hold a stake in the field, with 28 percent, 24 percent and 19.4 percent respectively.
BP stated that the new partnership "aims to improve production across Clair, initially targeting a 15 percent increase in average annual production on Clair Ridge, the second phase development of the field. This will be achieved through drilling the best quality wells safely and more efficiently and harnessing the skills and expertise of each company in a single collaborative team".
Greater innovation and the use of new technology will allow BP to drill targeted wells to access the oil reserves more effectively. As crude oil in this region of the North Sea is much heavier than other lighter oil in other parts of the area it is harder to extract and will require the expertise of each company in the partnership for successful oil production.
The partnership will mean the establishment of a steering group of representatives from BP, Baker Hughes and Oldfjell Drilling to make joint decision on effective well drilling.
“Using progressive remote operations models and digital solutions, this alliance is an important milestone on the shared journey towards safer, more profitable and lower carbon intensity operations.”, stated Marianne Davenport, vice president for oilfield services Europe at Baker Hughes.
This partnership comes just weeks after an International Energy Agency (IEA) report recommended a shift away from fossil fuel production in favour of renewable alternatives. However, the U.K. has made its stance clear, it has no intention of giving up on production in its oil-rich North Sea projects.
A government body told media sources that it intends to continue exploration in the North Sea, after the government reached a deal in March allowing offshore licenses in the region to continue.
"We are working hard to drive down demand for fossil fuels, however, there will continue to be ongoing demand for oil and gas," the UK department for Business, Energy and Industrial Strategy told Reuters in response to emailed questions.
Further, "We will not be cancelling licenses that were recently awarded. Any future licenses are only awarded on the basis that they are aligned with the government's broad climate change ambitions, including the UK’s target of reaching net-zero by 2050."
However, the U.K. government has faced controversy over this decision owing to its role as host to the U.N. Climate Change Conference (COP26) in Glasgow, Scotland, in November as well as being commissioned by the IEA to develop a path towards net-zero emissions by 2050. Critics say the U.K.’s role at the helm of climate change talks is at odds with its stance on North Sea oil.
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While several North Sea players, like Norway and Denmark, are heeding IEA warnings to curb exploration projects in favour of renewable alternatives, the U.K. is going full steam ahead in its production plans for the next few decades, with the Clair Ridge partnership presenting a significant area of opportunity for the oil majors involved.
By Felicity Bradstock for Oilprice.com
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Moreover, it has made the United Kingdom self-sufficient in oil for more than 40 years. In 2019 the North Sea produced 1.12 million barrels a day (mbd) while the UK consumption averaged 1.55 mbd meaning that the UK’s net crude oil import amounted to a small volume of 427,000 barrels a day (b/d).
Because of advances in technology, oil production from the North Sea isn’t dead. BP struck a deal with Baker Hughes and Norway's Oldfjell Drilling to enhance current production of 120,000 b/d at the 7 billion-barrel Clair Ridge heavy oilfield by 15%.
Whilst the UK is in the forefront of energy transition, it doesn’t hesitate to call on oil when there is demand for it. This gives the lie to claims by oil majors and developed countries that they aim to cut emissions to zero by 2050 or 2060.
Oil will continue to be the king of energy resources well into the future. Anybody who thinks otherwise is merely deluding himself.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London