Record North Sea licences spells good news for UK oil industry

By DOMINIC JEFF
Published on 25/10/2012 20:30

THE North Sea oil industry looks in robust health after the UK government revealed yesterday that it is granting a record number of exploration licences and Shell signalled its commitment to the region with a $525 million (£325m) acquisition.

The Department of Energy and Climate Change (DECC) has issued 167 licences covering 330 North Sea blocks in its 27th round – with a further 61 blocks still under environmental assessment.

Energy minister John Hayes said: “This successful licensing round shows we are taking the right action to offer certainty and confidence to investors. Our fiscal regime is encouraging small fields into production and our licensing regime supports new faces as well the big players to invest. Importantly, we are guaranteeing every last economic drop of oil and gas is produced for the benefit of the UK.”

Companies obtaining licences in the 27th round include giants BG Group, BP and Shell as well as more specialist North Sea operators such as Parkmead, Trap Oil and Xcite, which takes on three blocks close to its existing Bentley field.

Mark Higginson, senior partner at PwC in Aberdeen, said the level of interest was “fantastic news” for the UK oil and gas industry as well as for investors and support service businesses operating in the north east of Scotland.

“This demonstrates there is real longevity for the industry in this territory, and with it the potential to deliver a lasting legacy for Aberdeen,” he said.

Shell further reinforced its commitment to the North Sea as it revealed it is buying Hess Corporation’s interests in the Beryl area north-east of Aberdeen for $525m. It said it would invest further in the gas fields to keep them productive into the 2030s.

The Beryl area includes 12 fields on the UK Continental Shelf. They are operated by Apache and linked to the mainland via a 320-kilometre pipeline known as the Scottish Area Gas Evacuation System.

Shell said: “The Beryl cluster has a far longer anticipated lifetime than originally thought and may produce for a further two decades.”

The acquisition takes Shell’s interest in the different sections of Beryl to between 9 per cent and 65 per cent, depending on the field, and should lift its share of production from 9,000 barrels of oil equivalent a day to 24,000. The firm, which last month completed the acquisition of Hess’s 15.7 per cent interest in the Schiehallion field, said it intends to maintain its position as a “leading operator” in the UK sector.

Fairfield Energy, the Aberdeen-based oil and gas firm of which former BP chief executive Lord Browne is a director, added to the cheer yesterday as it announced it has started its drilling campaign north-east of the Shetland Islands. Fairfield also picked up exploration licences in the latest DECC round.