UK government opens more blocks, extends field allowance

Britain’s Department of Energy and Climate Change (DECC) has unveiled the UK’s 26th offshore licensing round.

Offshore staff

LONDON -- Britain’s Department of Energy and Climate Change (DECC) has unveiled the UK’s 26th offshore licensing round.

For the first time since 1998, blocks will be offered in all areas of the UK shelf, including some previously not explored. Also made available are the majority of areas licensed under the UK’s 1st Round in 1964 that have not been granted extensions. Additionally, bids are invited for 14 blocks relinquished under the UK’s Fallow Initiative, designed to stimulate activity on concessions where there has been no significant work program for three years.

Some areas, however, have been excluded from the latest round. These include blocks west of the island of Rockall, northwest of Scotland, and various blocks offered in the 24th Round in the Moray Firth (offshore eastern Scotland) and in Cardigan Bay (off western Wales).

DECC has also introduced a new Frontier license with an extended nine-year exploration term for the West of Scotland area, to encourage exploration in waters where there is a shortage of geological data.

Industry association Oil & Gas UK responded favorably to the announcement. Chief Executive Malcolm Webb said: “Since the beginning of oil and gas production on the UKCS, 39 Bbbl have been extracted and it is estimated that there are up to 25 Bbbl still to recover.

“This 26th licensing round reflects the collaborative work of industry and DECC in ensuring new acreage is made available to companies willing to explore for that oil and gas. In that regard, over the last two years since the 25th licensing round, the industry’s voluntary release of undeveloped acreage through the fallow process, together with acreage freed up as a result of first round license expiries, has helped enormously.”

Concurrently, the government announced that it would extend its new field tax allowance to west of Shetland gas fields. The aim is to encourage investment in gas infrastructure in this hostile frontier region, which should spur development of further gas as well as oil reserves in the area.

Webb said that while Oil & Gas UK had to study the details, potentially the allowance could trigger early investment in facilities in the region of over £2 billion ($3.23 billion) followed by a further £12 billion (£19.4 billion) over the next eight years, ultimately bringing 2 Bboe of new reserves into production.

“Furthermore, the establishment of the gas delivery infrastructure will stimulate exploration as it will enhance the viability of future discoveries in this frontier area…therefore this is a potential `basin-opener’.”

01/27/2010

More in Regional Reports