Industry Trend Analysis - Positive Momentum For Offshore Activity - MAY 2017
BMI View: Widespread interest in the UK ' s latest offshore licensing round, despite the frontier nature of the offered acreage, highlights positive momentum for renewed exploratory activity and risk tolerance in the UK offshore.
The 29th Licensing Round was the first UK licensing round in 20 years to focus solely on frontier, under-explored areas of the UK offshore; specifically, the Rockall Basin, the Mid-North Sea, and East of Shetland in the Northern North Sea. In total, the UK Oil and Gas Authority (OGA) has offered for award 25 licences for 111 blocks and part blocks to 17 companies. The interest in the license round despite the higher risk associated with the frontier nature of the acreage highlights positive momentum for renewed exploratory activity and risk tolerance in the wider UK offshore.
|Operator||Region||No. of Blocks||Work Obligations|
|Source: UK O&G, BMI|
|Alpha Petroleum||Nothern North Sea||1||TBC|
|Ardent Oil||Mid North Sea||11||Obtain & Reprocess 2D Seismic|
|Azinor Catalyst||Northern North Sea||10||Obtain & Reprocess 3D Seismic|
|BP Exploration||Nothern North Sea||5||Reprocess 3D|
|Centrica North Sea||Mid North Sea||10||Reprocess 2D|
|Chrysaor||Mid North Sea||6||Obtain & Reprocess 2D Seismic|
|Decipher Energy||Northern North Sea||3||Reprocess 3D|
|Draupner Energy||Mid North Sea||4||Obtain & Reprocess 2D Seismic|
|Esso Exploration||West Of Scotland||14||Reprocess 2D|
|Nautical Petroleum||Northern North Sea||2||Obtain & Reprocess 3D Seismic|
|North Sea Natural Resources||Mid North Sea||7||Obtain 2D|
|Shell||West Of Shetland||13||Obtain 3D|
|Slimwell Resources||Mid North Sea||7||Obtain & Process 2D|
|Statoil||Nothern North Sea||17||3 Exploration Wells, Obtain 3D|
|TAQA Bratani||Nothern North Sea||1||TBC|
|The Steam Oil Production Company||Mid North Sea||4||Obtain 3D|
|Zennor||Nothern North Sea||1||Obtain & Reprocess 3D Seismic|
Offshore Activity Gains Momentum
The award of the offshore acreage will spur renewed momentum in 2D and 3D seismic exploration and, importantly, ensures the drilling of several exploratory wells over the short term. Exploratory activity in the UK continental shelf has been at multi-year lows as the low oil price environment has pared back investment, particularly in higher-risk frontier exploration. However, we have highlighted previously that we expect a tick up in exploratory activity over 2017, as companies' appetite for risk returns, driven by a gradual recovery in the oil price and stronger fiscal positions as companies' cost-cutting and asset streamlining has improved cash-flow and enhanced operational efficiency (see ' Returning Risk Appetite To Exploration Activity ' , January 6 ).
The entry of both Shell and Exxon (through its subsidiary Esso Exploration) into acreage situated to the West of Shetland and further south in the Rockall Basin, west of Scotland, is of particular interest. The West of Shetland has seen some of the most positive exploration successes of recent years, with the area offering arguably the largest remaining exploration potential for significant new finds in the UKCS (see ' The North Sea ' s Last Frontier: West Of Shetlands ' , January 11). Similarly, the Rockall basin is touted as a prospective area with proven working petroleum systems. The economic clout and technical expertise that the two majors bring to these exploration areas will aid in exploratory activities going forward.
Private Equity Continues Its Push
Notably, several companies awarded acreage in the latest licensing round are backed by private equity players, highlighting an ongoing trend of PE players increasing exposure to oil and gas assets ( see ' PE To Grow Presence In Global O&G', January 20). For example, Chrysaor has been awarded six blocks in the mid North Sea region, which follows a significant asset deal with Shell earlier in 2017 (see 'Asset Deal Supports Extended Production', January 31). The company, backed by EIG Partners, will look to increase its resource base through exploration, in addition to maintaining and producing from its acquired fields.