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UK Energy Minister faces challenge of maintaining North Sea production

David Young
OGJ Online

It has been something of a custom that the UK government minister responsible for the country's oil industry has had strong Scottish connections, normally representing a Scottish constituency.

Brian Wilson, the minister since last June, continues the custom. He is an MP for a Scottish constituency, and by birth and upbringing he is a West Highlander. There is a third aspect that makes him a popular choice in the UK. He represents an area that is economically dependant on the main elements of the Scottish energy scene, the home to the country's nuclear power generation industry and near the shipyards that now depend on the offshore construction industry.

Prior to becoming an MP in 1997, Wilson was a journalist and founded the West Highland Free Press, regarded at the time as a somewhat radical, anti-establishment newspaper that championed the needs of the sparsely populated area. The West Highlands historically had depended on the fishing and farming industries, and in many ways was similar to Norway, but had not seen the same benefits from the discovery of oil.

During this period he built an extensive knowledge of the economic, social, and environmental impact that the oil and gas industry could have. He seems to have achieved the impossible in that he is respected by those with opposite views of the energy industries.

Wilson is, therefore, seen by most in the oil industry as a minister who understands it better than many of his predecessors.

However, he also has taken office at a time when the UK oil and gas industry is a mature one and the contentious decisions may all have been taken. He is, therefore, aware that his role in working with an industry that has an important economic part to play is one of helping create the right conditions for progress to be maintained through cooperation and cajoling.

He is now involved in the UK government's energy review, which some have forecast will sound the death knell for the nuclear power industry and start a rush into renewables. Indeed, Wilson has encouraged wind farms planned for the West of Scotland. His department is considering wave-power projects in the North of Scotland. With the biggest contributor to the economy in his parliamentary constituency being the Hunterston nuclear power station, Wilson faces a juggling act between the demands of differing energy lobby groups.

However, he has made it clear that the oil and gas industry is of vital importance to the UK economy, and the issue of security of supply will probably emerge as the main element of the review.

A major element of this policy will be the UK's relationship with Norway and the increase of gas imports from the Norwegian North Sea.

Wilson has been working to build a relationship with his Norwegian counterpart. The UK's policy toward the gas market must change, however, if Norway is to be convinced that increasing its infrastructure to meet UK needs can be justified. Wilson will have to address the problems created by the UK unregulated markets involving short-term gas contracts when Norway needs long-term commitments to proceed with investments.

An important part of this process has been changes in the treaty by which the Norwegian Vesterled pipeline system connects Norway's Heimdal field processing facilities to the existing Frigg pipeline on the UK continental shelf. This has benefits for both the UK and Norway as it has allowed Norway to develop Heimdal as a gas-processing hub and to make continued use of Frigg pipeline as the Norwegian sector of Frigg gas field reaches depletion. It also allows for the continued supply of gas to the UK.

The revision to the Heimdal treaty also will allow for natural gas liquids from the Heimdal processing center to be transported to the UK via the Norwegian Heimdal-Brae pipeline and UK pipeline infrastructure. It also will allow, for the first time, for liquids from fields other than Heimdal to use Norway's Heimdal-Brae as part of the transportation route to the UK. Again there is mutual benefit to the UK and Norway, in terms of value to UK and Norwegian operators and of longer-term security of supply.

Wilson's creation of a joint working group to focus on future collaboration between the UK and Norway in the oil and gas sector typifies his approach.

The group includes 23 government and industry representatives from the PILOT project and their Norwegian counterparts. PILOT, established in January 2000 to secure the long-term future of the oil and gas industry in the UK, has the primary goal of sustaining production of 3 MMboe/d through 2010.

Wilson also is concentrating on squeezing resources out of existing developments through the use of new technologies.

He particularly is enthusiastic about the recently approved Clair field project West of Shetland.

"This demonstrates that there is a lot of potential left in the UK offshore industry, based on innovation and technology. BP PLC and all of the other Clair partners have undertaken an innovative approach to overcome some challenging obstacles."

The first phase of the development is expected to produce 300 million bbl, making it the largest development since Elgin-Franklin field was approved in April 1997. Dependent on initial results, development of nearby fields could follow.

Wilson also plans to push for development of marginally economic fields. "There are currently 250 fallow fields and 200 unused licenses. Research shows that these fields can play an important role in helping the industry meet its ambitious investment targets. Unlocking them is crucial to the future of our industry, " he said.

Contact David Young at Davidy@OGJonline.com.


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