Britain's offshore operators' association UKOOA is lobbying again for tax changes, this time to sustain asset trading in the depressed UK sector. A year ago, it was pleading with the British government not to implement punitive new measures, following a review of the petroleum tax regime. In the event, the threatened overhaul was halted by sliding oil prices.
However, the recent upward reversal has not lifted the gloom in the UKCS. The government's own forecast is for halved exploration and production activity in the sector this year - 27 wells in total, against 59 last year. In tandem, UKOOA claims that new development capex in 2000 will hit a low not seen for two decades.
As a stimulant, it would like the government to extend capital gains tax (CGT) rollover relief to North Sea production asset trade-outs. In recent years, newcomers like Talisman Energy have used acreage swaps to swiftly build a position of strength, in turn, helping to sustain activity on ailing fields developed originally before 1982 - in an era when CGT impact was minimal. Post-1982 developments are more exposed to this tax, which may be deterring some would-be investors in the UK shelf in the current climate. Rollover relief has been extended in the UK to other industries. Why not bracket North Sea fields too, UKOOA argues.
Despite UKOOA's claims, trading on the shelf has remained brisk. In an attempt to reduce its debts, Ranger Oil sold its majority stake in its mainstay North Sea production unit, Anglia, to Cal Energy Gas for $64 million. Lasmo picked up $140 million from gas-hungry Gaz de France for numerous southern North Sea assets. The cash likely will go towards Lasmo's agreed takeover of fellow independent Monument Oil and Gas. Both are stakeholders in the Liverpool Bay oil and gas complex offshore North Wales.
Elf now wants to exit its costlier assets in the UK North Sea, namely the Claymore, Chanter, Piper B, and Saltire fields, as well as the Flotta oil terminal in Orkney and associated pipelines. The stated aim is to concentrate on larger-scale new developments such as Elgin/Franklin in the central North Sea, but Elf may also be seeking finance for its proposed takeover of Saga Petroleum.
Cook stirs into action; Åsgard finally delivers
One relatively old UK discovery, the 20 million bbl, 15 bcf Cook Field in central North Sea block 21/20a, is to be developed as a two-well subsea tieback to the Shell/Esso FPSO Anasuria. Cook operator Enterprise Oil plans to have the field's first well onstream around a year from now, producing at 10,000 b/d.
The location for the second well has yet to be confirmed, but that too should be in production by 2001, doubling the field's output. The wellstream will head to the floater - host for the Teal fields - through an 8-in. flowline, with a 3-in. service line for chemical injection and gas lift. Budget for the development is £60 million.
In the Norwegian sector, BP Amoco could tie the Tambar prospect back to the Ula Field, using associated gas to prolong output from the Ula reservoir for a further decade. A decision is due by year-end.
Just onstream is the Statoil-operated Åsgard field complex off Mid-Norway, heavily slated by Statoil shareholders for cost overruns and delays, partly due to late delivery of the FPSO from Hitachi. Seven more subsea producers and six gas injectors will come into service in the next few months, easing daily production up to 155,000 bbl.
In time, Åsgard floaters will also be used to store gas and process condensate from the Halten Bank South development, taking in the Kristin, Lavrans, Trestak North, and South Tyrihans fields. The Saga-led team is pressing ahead with a solution, mindful of the need to be in the frame for the next round of Norwegian gas allocation contracts. Saga had rejected an original plan for a TLP as the central processing platform on cost grounds in favor of subsea completions. Recent studies suggest this latter solution could break even at $10/bbl.
However, one of the big questions for Saga is whether to tie all the wells back 30 km to Åsgard, or to include
a dedicated production semisubmersible. Matters are complicated by the very high pressures and temperatures in Kristin in particular, and also by the uncertainty over Saga's future, following heavy losses and takeover bids.
Settlement opens Atlantic tracts to drilling
Drilling cutbacks do not apply to the high risk, but potentially higher reward, Northern Atlantic sector. In fact, activity there should pick up following settlement of the long-running dispute between the Faroe Islands and the UK over their maritime boundary. Government representatives signed an agreement in Faroese capital Torshavn in May to define the new 200-mile median line.
The concord should allow the long-awaited Faroes 1st exploration licensing round to proceed in October. This may include blocks in the formerly disputed "White Zone," which lie close to the main oil discoveries off the Shetlands, Foinaven and Schiehallion.
Norway's Petroleum and Energy Ministry has awarded 11 new production licences in mature North Sea areas close to established producing fields and existing infrastructure. Norsk Hydro led the way with three operatorships, while Agip, BP Amoco, and Esso gained two each. In five of the licences awarded, there is no obligatory state participation.
The government also announced that the state would in the future keep out of all new Norwegian North Sea licences, except those where resource potential looks high. It also promised NKr 100 million towards new technologies for the Norwegian Shelf. However, more radical tax relief measures had been anticipated.