Oil & Gas UK: New licenses need to translate into new wells

Oil & Gas UK has commented on the results of 28th Licensing Round announced yesterday (November 6) by the Department of Energy and Climate Change (DECC) UK.

Oonagh Werngren MBE, Oil & Gas UK’s operations director, said: “Today’s announcement by the UK Government that it is to award 134 licences to companies wanting to explore for oil and gas on the UK Continental Shelf (UKCS) is very welcome. While the number of licences is less than the record number of applications in the 27th licensing round, this news is a good sign that investors continue to show interest in the basin.

“It is extremely important to ensure the award of these licenses translates into the drilling of more successful wells on the UKCS, and we need to ensure the pipeline of new developments continues to flow from the basin.”

It is interesting to note more than 60 companies applied for licences in this round and that the majority comprised smaller investors. Perhaps what is most telling is the nature of the work programmes that companies have committed to, with only five firm wells and four contingent wells being included. Most licences have been awarded on the basis of obtaining or reprocessing 2D and 3D seismic data. The disappointingly low number of wells highlights the need to stimulate new plays through detailed technical work which requires measures to encourage more investment in the UKCS.

The industry is facing a number of major challenges, including the lowest level of exploration for some time and rising costs in the sector. It is extremely important to ensure the award of these licenses translates into the drilling of more successful wells on the UKCS, and we need to ensure the pipeline of new developments continues to flow from the basin.

On a more positive note, it is encouraging to see companies beginning to look seriously at frontier areas, stepping away from the known basins and into deeper water. We also note licenses for 94 Blocks in the licensing round are in, or close to, areas under special protection and conservation. We would encourage the Government to carry out environmental assessments urgently so that these additional areas (with all measures implemented to protect the environment) can contribute to boosting activity in the basin.

Full implementation of Sir Ian Wood’s recommendations for regulatory reform, and far-sighted changes to the fiscal regime, are needed to step up momentum. We look forward to working with Andy Samuel, announced today as the CEO of the new Oil and Gas Authority, as he implements the findings of the Wood Review to ensure the industry continues to maximise economic recovery from the UKCS.”

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