Industry Trend Analysis - Quick View: Licensing Round Key To Return Investment - SEPT 2017


The Latest: The UK Oil and Gas Authority has launched the 30 th offshore licensing round, offering 813 blocks or part-blocks in mature offshore UK areas. Blocks are offered all over the UK continental shelf (UKCS), with acreage available around the Shetland Isles, Southern, Central and Northern North Sea, as well as the East Irish Sea.

Drilling At Multi-Year Lows
UKCS Exploration, Appraisal & Development Wells
f = BMI, OGUK forecast. Source: Oil & Gas UK, BMI.

Implications:

The favourable location and quality of the acreage offered as well as supplementary data released alongside the licensing round, will support renewed interest in the UKCS, supporting future investment. With exploration, development and capital expenditure at multi-year lows, the latest licensing round will be an important development for a return of investment into the basin. Importantly, the round focuses on mature areas of the UKCS, some of which encompass undeveloped discoveries and which are directly adjacent to currently producing plays; some of the blocks offered have not been available for acquisition since the early 1960s. There is a clear focus in this round of licensing on offering upstream players lower-risk, lower cost exploration and development opportunities, with opportunities for operators to tie back new potential discoveries to existing infrastructure.

Similarly, the block offering is supplemented by an extensive data release from the UK Oil and Gas Authority. Offering the free information will lower costs on independent seismic surveys and data collection and is intended to generate additional interest in the licensing round, particularly from smaller independent companies. The data offered encompasses a huge range of metrics including gravity data, regional geological maps, well log details, proprietary reports from some of the largest operators as well as perhaps most importantly, detailed subsurface data on previously undeveloped hydrocarbon discoveries.

What ' s Next?

The round will close in November, with results expected in Q218. Investment interest in the blocks offered will be a crucial step in addressing declining exploration in the basin as a whole. At present, we expect oil and gas output will reach a peak over the next two years, before falling into a structural decline to the end of our forecast period.

Related Research:

( ' North Sea Investment To Rise ' , June 21), ( ' Tie-Backs, Small-Scale Projects To Be Increasingly Favoured ' , June 5), ( ' Positive Momentum For Offshore Activity ' , March 23).