OFFSHORE EUROPE: UKOOA sets target production at 3 million BOE/d through 2010

Technology initiatives will test ingenuity

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Britain's oil and gas industry is straining harder than ever to sustain UK Contin-ental Shelf (UKCS) production levels. Contractors and suppliers are being encouraged to devise ways to make even the smallest finds economic, as cumulatively, these amount to several billion bbl of oil equiv-alent (boe) of untapped reserves on the UK shelf.

Projects such as BP's 10 mm boe Wood are therefore attracting intense design competition. However, many fields such as Wood may be needed quickly, judging by the latest economic review issued by the UK Offshore Operators Association (UKOOA). This estimates replacement reserves via exploratory drilling in the UKCS last year at 200-400 mm boe, far below the likely aggregate production figure for 2000 of 1.7 billion boe. Prospects for larger replacement finds rest on the outcome of the UK's 19th licensing round, relating to the previously unexplored waters bordering the Faeroes.

Cost reductions

In the meantime, the association points out, UK production costs remain high compared with those of other competing nations. To maintain the government/industry production target of 3 mm boe/d through to 2010, further cost reductions and application of new technologies will be needed.

In the short term, the development picture is not too bad. UKOOA's survey of operators' intentions indicates spending between 2001 and 2004 of more than £12 billion. Most of the projected new field developments will employ subsea wellheads and existing North Sea platform/pipeline infrastructure to contain costs. High throughput is necessary to keep this infrastructure economic.

What the industry does not need, however, is for the government to heed the outcry from UK road transporters following the recent record profit announcements from BP and Shell. There have been calls for a "windfall tax" on oil companies in the run-up to Britain's anticipated general election in May. However, UKOOA points out that the UK's Treasury also has benefited from high oil prices, raking in £5.3 billion from offshore tax revenues in 2000/2001, nearly £2 billion above previous estimates.

Stimulate activity

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The industry's collective will to sustain exploration and development activity keeps spawning fresh initiatives. In January, UKOOA unveiled "Exploration LIFE" (Lift Inspired Farm-in Event), designed to promote exploration by inviting fresh ideas to stimulate new seismic and drilling activity. Around 20 blocks have been posted on the LIFT website Previously, these blocks either lacked a firm activity plan for 2001, or proposed exploration was not supported by all the licensees.

According to Mark Sawyers, UKOOA's exploration committee chairman for 2000, LIFE "breaks new ground in that existing co-venturers have agreed either to farm out or to fund their share of the best work programs proposed. More significantly, they have also agreed in principle not to exercise their pre-emption rights on the business opportunities the initiative will create. This will help to streamline access to UK acreage for new entrants and start-ups, as well as providing opportunities for companies to come forward with innovative technologies and fresh ideas such as using ocean bottom cable seismic surveying, for example, or cost-effective multi-well programs and prospect clusters." UKOOA is also working on other proposals such as drilling joint industry stratigraphic wells.

Flaring scheme

Last month, the government-industry taskforce, Pilot, announced a flare transfer scheme to reduce gas levels flared at over 55 UK offshore fields. Gas flaring and carbon dioxide production from UK operations constitute 1% of Britain's overall emissions. Under the new scheme, the 10 participating oil companies will apply as before for consents to flare nominated quantities of gas on a field-by-field basis.

This time, however, they will then set a voluntary target for each of their fields, which is below the level of consent. If they improve their performance on certain fields, they will then be able to "transfer" some of their consent to other fields that failed to meet agreed flare levels. UKOOA believes this trade-off will lead to more cost-effective installation operations overall.

Among more established Pilot initiatives are the Industry Technology Facilitator, which focuses on four technology "silos" considered key to the UKCS, namely wells, subsurface, process facilities, and decommissioning. Following consultations between 18 operator oil companies and 60 technology suppliers, 29 new schemes were proposed last year, of which 10 attracted funding (£2.1 million in total). The target this year is to launch 30 new schemes with a combined value of £8-10 million.

Streamlined regulation

Another Pilot project involves streamlining UKCS regulation and licensing. At a presentation in London last month, Malcolm Brinded of Shell credited the UK Department of Trade and Industry for introducing new measures, such as speeding up pipeline works authorization by 25% for fast-track developments.

A new study on fabrication opportunities was less productive. Increasingly, yards in the UK are closing down as work opportunities dry up. Consafe's in Burntisland, Scotland, is the latest. There had been hopes that platform decommisioning would soften the attendant job losses, but the operation requires far less manpower than platform assembly. Higher oil prices also have had the effect of prolonging the lifespan of older UK installations as operators try to squeeze out every last drop of oil.

For the yards that survive, there are some pickings in prospect. Pilot's review of undeveloped discoveries has identified 21 field clusters, of which six (involving 42 accumulations) are viewed as joint development candidates on the lines of BP's multi-field ETAP project in the Central North Sea. However, certain technology issues relating to these clusters must first be addressed, such as heavy oil, low permeability, and high-pressure/high-temperature reservoirs.

The same Pilot sub-group has reviewed incremental development potential at existing, or "brown," UKCS fields. It concluded that potentially a further 2-4 billion boe could be extracted, given that the average UK sector discovery these days is no more than 30 mm boe, and that the brown field figure equates to 100 or more such discoveries, Brinded pointed out.

Brinded's own company, Shell, is currently employing three drilling rigs on seven of nine UK installations dating from the 1970s, he said. That compares with activity on only two of these fields five years ago. The main driver in this regard was fiscal stability, he said, "with the oil price being all over the place." The last thing the UK industry needed was another variable in the tax regime, he added.

Personnel initiatives

Finally, Pilot's NTO group was established to rectify the exodus of skilled staff from the industry that occurred during the recent downturn. Since the average age for remaining staff in the UK is 48, many more personnel will disappear through retirement. NTO's remedial suggestions include its website, where prospective employees can advertise their CVs free of charge. Currently, 270,000 people are working in the industry in the UK. "If we hadn't started our initiatives two years ago," Brinded claimed, "only 100,000 would have been employed by 2010. Our new efforts will hopefully safeguard 200,000 jobs."

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