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    UK Awards 113 Licences in 32nd Offshore Round (Update)

Summary

The OGA will now pause licensing activity, while the government undertakes a review to ensure that future production is in line with its 2050 net-zero target.

by: Joe Murphy

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UK Awards 113 Licences in 32nd Offshore Round (Update)

(Adds comment from Premier Oil at end)

The UK's Oil and Gas Authority (OGA) has awarded 113 licence areas to 65 companies in the country's 32nd offshore licensing round, it said on September 3.

The licences covers over 259 blocks or partial blocks in producing areas close to existing infrastructure across the North Sea and West of the Shetlands. Terms are flexible, the OGA said, allowing companies to define a licence duration and phasing that will enable optimal work programmes.

The UK's 31st licensing round led to the award of 37 licences to 30 companies. The 32nd round opened in July last year and bids were accepted until November. Among those awarded licences were European majors BP, Total, Equinor and Shell; mid-sized firms like Neptune, Chrysaor and Premier Oil; and juniors such as Independent Oil & Gas (IOG) and Deltic Energy.

The OGA said it would now take a pause from licensing activity, however, noting that no round would take place in 2020-2021.

"This will allow relinquishments to take place so more coherent areas may be reoffered in future, giving industry time to deliver on work commitments in the existing portfolio of licences," it said, encouraging the industry to use the period to acquire data and carry out studies in preparation for the next round.

The government, meanwhile, said it was reviewing its policy on oil and gas licensing to ensure that future oil and gas production was in line with its efforts to tackle climate change. Initial findings will be published in the upcoming Energy White Paper.

While more than half of UK power comes from clean sources, oil and gas are still needed for heating, cooking and transport, and for producing everyday essentials such as medicines, plastics, cosmetics and household appliances, the government explained.  It also highlighted the industry's economic contribution, supporting 270,000 jobs across the country and generating £330bn ($440bn) in production taxes alone.

"While we have decarbonised our economy faster than any other major country over the past two decades, the oil and gas sector will continue to be needed for the foreseeable future as we move toward net zero carbon emissions by 2050," Business and Energy Secretary Alok Sharma said. "Our review into future oil and gas licensing rounds will ensure we are able to meet our net zero target, while protecting jobs across the country as part of our plan to build back better with a greener, cleaner economy."

The independent Committee on Climate Change has recognised that fossil fuel demand will continue in any scenario that sees the UK meet its target of net zero emissions by 2050. Energy imports will carry a larger carbon footprint than domestic production. The UK offshore only contributes a few percent to the national emissions.

Awards

In the round, Independent Oil & Gas (IOG) was offered four blocks in the southern North Sea, where it is developing a gas project. The four blocks are all adjacent to IOG's existing assets. Its joint venture with CalEnergy Resources (CER) was awarded a licence for blocks 49/21e and 49/22bn. They respectively contain the Viper gas discovery with 46bn ft3 in mid-case recoverable reserves and the Sinope South find with mid-case recoverable resources of 35bn ft3.

IOG was also offered 100% rights to blocks 48/23d and 48/24c between its Blythe and Harvey licences, containing the Allerdale, Driftwood and Bradfield prospects and a possible northwest extension of the Redwell field. Work obligations include various seismic work but there are no well commitments.

"The OGA's offer of these highly synergistic licences is excellent news for IOG, further validating our focus on licence rounds as a highly cost-effective route to enhance our portfolio," company CEO Andrew Hockey said. "With several existing gas discoveries, these new licences fit straight into our focused strategy of cost-efficient production hubs delivered through co-owned infrastructure, providing opportunities to drive up shareholder returns."

IOG and CER aim to develop six fields at their existing acreage in two phases that will recover up over 400bn ft3 of gas. Production from the first phase is due to start in July 2021.

Deltic Energy meanwhile won six licences covering 12 full and partial blocks. Five licences are in the southern North Sea and one in its central part. One was awarded jointly to Deltic and Shell, which will have a 70% interest. The major has teamed up with Deltic to drill two wells in the southern North Sea's Pensacola prospect, for which it has analysed the seismic data; and the Selene prospect . Drilling at Pensacola is expected in the second half of next year, and at Selene the following year. 

Premier Oil said it won two licences directly adjacent to its Tolmount Field Development Area in the southern gas basin, with 50% of each. Blocks 42/28e and 42/29b are in the licence directly to the east and operated by Premier. Dana is Premier's 50% partner in the two licences and the operator of Blocks 42/27, 47/2b and 47/3g which are directly to the west. 

Premier is examining "a number of leads and prospects previously identified on the new blocks which could be developed via the Tolmount infrastructure." There are no well commitments associated with these awards. With its joint venture partners, Cairn, MOL and Dyas, it was awarded Block 28/9f adjacent to its Catcher Area , an oil producing field.

Australia-listed Talon Petroleum also said it had been offered three North Sea licences, saying they offered strong exploration potential and low-cost work commitments.