Offshore oil is back on the British government's agenda as a key component of the country's "Oil and Gas Industrial Strategy" at a time when North Sea investment has experienced several years of decline despite the potential.
New projects are already coming online in the North Sea and in the Atlantic to launch this revival. For starters, we have BP's $500 million Clair Ridge appraisal drilling program, which eventually hopes to produce oil for some 40 years. Another $7 billion investment from Norway's Statoil will represent the largest single offshore project in the North Sea in over 10 years, and the Oil & Gas UK industry association is expecting 2013 figures of 470 million barrels of hydrocarbons-up five times compared to the past three years.
The BP-led consortium at Clair Ridge, in the Atlantic, says drilling has already started on the first of five wells planned over the next two years. The consortium includes Shell, Chevron and ConocoPhillips and the group believes it is sitting on 8 billion barrels of oil. It also thinks this Atlantic project could rival anything the North Sea has had to offer in terms of production.
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Beyond that, the association says some 2 million barrels of oil per day should be pumping by 2017 from the North Sea.
Everyone is also eyeing hydraulic fracturing operations in the North Sea, as Trap Oil begins drilling to unlock more potential.
In mid-April, a group led by E.On Ruhrgas UK E&P Ltd. started oil production from Huntington field on Block 22/14b in the UK Central North sea 140 miles northeast of Aberdeen, Scotland. After an initial ramp-up period, the field is expected to produce 25,000-30,000 b/d of oil equivalent. This project uses a six-well subsea drilling scheme and is connected to the 12km BP gas pipeline.
This is where things are going thanks to a bit of a change in attitude with the UK's new energy strategy, which sees which way the winds are blowing: In 2012, investment was £11.4 billion. This year it's already at £13 billion.
What this new energy strategy most likely heralds is a rethink by the government over how much it wants to interfere in the oil and gas industry. A £10 billion tax raid two years ago hit North Sea operators hard in the 2011 budget. Last year, they attempted to renew incentive for North Sea exploration and production with a new tax measure to protect at least some profits for those companies working to redevelop older fields.
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Malcolm Webb, chairman of industry body Oil and Gas UK, told the BBC: "The strategy fosters strong and meaningful collaboration between the government and industry and will help to focus efforts on addressing particular areas such as skills, technology and exports.
"It will further strengthen the oilfield services sector across the country, boost investor confidence, safeguard jobs and help to maximise recovery of Britain's oil and gas reserves."
By. Charles Kennedy
Charles is a writer for Oilprice.com More