UK upstream regulator the North Sea Transition Authority (NSTA) is offering an additional 34 blocks in its 33rd oil and gas licensing round that was launched just days ago.
The NSTA confirmed on Thursday it was adding these extra blocks in the central and southern North Sea after further consultation with the Ministry of Defence (MoD).
“We consult with a range of stakeholders: the Crown Estate, Crown Estate Scotland, Coal Authority, Marine Scotland Marine Management Organisation and [the] MoD before we offer blocks for licensing. This is so that we don’t offer acreage that is already earmarked for another purpose,” an NSTA spokesperson told Upstream.
“With these extra blocks, because of the speed with which we finalised the details of the round, we simply ran out of time to consult the MoD on them and had to hold off offering them until they had taken a look.”
The NSTA, previously known as the Oil & Gas Authority, officially launched the 33rd oil and gas licensing round on 7 October, which comprised 898 blocks and part-blocks for exploration and potential development.
This offering contained tracts across all known producing areas on the UK continental shelf — the southern North Sea, central North Sea, northern North Sea, West of Shetland and East Irish Sea — while also focusing on assets with fast-track development potential in the southern gas basin.
Consultancy Wood Mackenzie said the discovered resource opportunities in this bid round could prove more attractive than the exploration acreage, as it estimates nearly 2 billion barrels of oil equivalent will be up for grabs, over a third of which is gas.
The licensing round highlights four priority cluster areas in the southern North Sea — the Greater Pegasus Area, Greater West Sole Area, Greater Cygnus Area and Cotton Area.
These clusters include 30 predominantly gas discoveries that could be developed quickly and make use of nearby existing infrastructure. In total, they could deliver 1 trillion cubic feet of new supply, enough to meet 40% of the UK’s annual gas demand.
While these discoveries will have been previously relinquished, current commodity prices and area-wide solutions could unlock on their potential, WoodMac noted.
Drilling at historic lows
However, the Edinburgh-headquartered consultant is less bullish on whether this latest UK licensing round will spur an exploration renaissance in the mature hydrocarbon-producing nation.
“While we think exploration still has a role to play in the [UK continental shelf], drilling activity is already at historic lows and the addition of new acreage — which will have been offered up in previous rounds — is unlikely to reverse that trend significantly,” said Neivan Boroujerdi, research director for North Sea upstream oil and gas at WoodMac.
“It remains to be seen what industry appetite will be. With tax relief on exploration and development spend increasing from 40% to over 90% under the Energy Profits Levy, there is an immediate incentive to ramp up activity while the levy is in place.
“But typically, most active explorers and developers are local players who will not be able to take full advantage and will require farm-in partners. Can the bigger [international oil companies] overcome increasing environmental scrutiny and political instability to step up the plate?” Boroujerdi asked.
The application period for acreage will run until 12 January with the first licences expected to be awarded in the second quarter of 2023. WoodMac reckons upwards of 100 licences could be awarded from this bid round.
While the UK has hosted oil and gas discoveries in recent years, not since the 27th Round of 2012 has new acreage delivered a commercial find. The first exploration well from the last licensing round held three years ago is not expected to be drilled until 2023.
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