Exploitation of the UK North Sea’s untapped unconventional oil and gas play could unlock potential resources of 21 billion barrels of oil equivalent, generating billions in additional tax revenue for the state, according to a report.
The latent resource potential of the Upper Jurassic Kimmeridge Clay formation is in the spotlight ahead of a Scottish referendum vote on independence on 18 September that could see Scotland get its hands on future revenue from North Sea production.
London-listed explorer Trapoil holds exclusive rights to unconventional blocks off the UK and is now said to be developing technology to tap the play.
In the report produced by pro-independence Scottish business group N-56, Trapoil’s chief executive Mark Groves Gidney is quoted as saying: “Offshore unconventional oil and gas could materially change the UK economy, let alone the North Sea oil and gas industry.”
The 21 billion-barrel resource estimate is based on a conservative 5% recovery rate for the North Sea’s estimated 420 billion boe of unconventional oil and gas resources, according to the group.
It has calculated the additional resources could generate another £300 billion ($498 billion) in tax revenue either for the UK as a whole or an independent Scotland, based on a wholesale value of up to £2 trillion, dependent on oil prices.
This is on top of the UK's remaining conventional reserves of 24 billion boe that could provide £365 billion for state coffers, according to the group.
It stated that a total of 42 billion boe has been produced from the North Sea to date using conventional production techniques.
A senior official with the UK’s Department of Energy & Climate Change was quoted as saying: “They (Trapoil) are developing technology which will enable them to successfully recover oil from this structure and, as there is a considerable amount of this source rock around, it could potentially be an enormous new play for the North Sea.
“As you may expect, the potential upside for Trapoil is huge and as such there is a lot of commercial sensitivity around their work.“
The N-56 group stated that a team of experts led by petroleum geophysicist Dr Christopher Cornford is currently looking at how to transfer drilling and fracturing techniques developed in the US onshore shale boom to an offshore setting to tap the North Sea’s unconventional play, having presented the project at a recent conference in Denver, US.
Such resources could be tapped using tie-backs of unconventional production to existing infrastructure that is becoming available as mature UK fields become depleted, thereby extending the lives of these facilities, according to the group.
It draws a parallel with Denmark where state-owned Nordsofonden has described possible exploitation of the country’s offshore shale resources as “a potential game-changer”, with domestic player Maersk Oil currently studying the potential of Upper Jurassic source rocks.