MORE than three billion barrels oil and gas are held in North Sea discoveries that firms have no plans to develop according to an expert study that highlights the challenges facing the area.
The figure comes from research led by the Oil and Gas Authority regulator which underlines the risk that a big share of the remaining reserves in the North Sea may never be developed.
The research found that a significant number of undeveloped fields are owned by majors, who are shifting investment from the area.
The competitive mindset in the NorthSea combined with resistance to innovation may be preventing the industry making the changes required to unlock the potential of what one expert described as a resource of national importance.
The study identified 363 finds which are known to contain oil and gas but which look unlikely to be brought onstream unless there is a big change in industry conditions.
The 3.4bn barrels they contain may represent as much as a third of the total oil and gas remaining in the North Sea.
However, the OGA found the majority of discoveries are held in sub 50 million barrel small pools. Many industry players have lost interest in these kind of finds since the crude price started tumbling.
The fall in prices, from $115 per barrel in 2014 to around $50/bbl, means firms are unlikely to commit to the costs involved in developing such small fields.
The OGA found that 155 finds are in unlicensed areas, with no firms responsible for them.
It would take a big increase in prices for such areas to generate interest in the industry.
North Sea firms are braced for a long period of low oil prices even following signs major producing nations may cut output to support the market.
The chief executive of BP, Bob Dudley, said yesterday the oil and gas giant expects oil to sell for $50 to $60 next year.
He noted that BP has responded to the oil price fall with a cost cutting drive that should allow it to break even at less than $55/bbl next year. BP cut hundreds of jobs in the North Sea.
The company has been retrenching in the area and focusing investment on giant fields West of Shetland which it is developing with Royal Dutch Shell.
The OGA study found around 50 of the undeveloped fields are owned by majors, with Shell and BP controlling 13 and nine respectively. Giants must generate bigger profits from developments than smaller firms to help meet their return targets.
The OGA reckons technology could play an important part in making the most of the undeveloped fields, which Gordon Drummond of the National Subsea Research Initiative said had national importance.
“If the subsea industry can rise to the challenge of economically tapping into these pools, the North Sea could have a whole new lease of life,” he said.
But Mr Drummond warned: “Technology is only part of the solution, the industry must be much more receptive to innovation – there must be a willingness to work more collaboratively on multi-field applications and on access to infrastructure.”
Last month the latest state of the North Sea report from Oil & Gas UK warned investment in new fields and exploration would likely remain at rock bottom levels in 2017.
The industry body noted more than 43 billion barrels oil equivalent has been produced from the North Sea since 1967.
It reckons between 10 and 20 billion barrels are still to be recovered, including finds yet to be made.
Mike Tholen, Upstream Policy Director at Oil & Gas UK, said yesterday: “Industry has been working closely with the OGA over the past 18 months to address the significant opportunities small pool developments represent across the United Kingdom Continental Shelf.”
North Sea production totalled 602 million barrels oil equivalent last year. The OGA found supermajors such as BP control 47 undeveloped North Sea discoveries.
Some relatively small firms have continued to invest in the North Sea amid the downturn..
Surrey-based Hurricane Energy has boosted hopes there may be significant amounts of oil and gas to be recovered from the under-explored deeps West of Shetland. It said yesterday a well on the Lancaster find had flowed at strong rates.
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