To scan Bassoe Offshore Consultant Ltd.'s latest rig update for the North Sea, the upturn in drilling activity on which the UK oil and gas industry pinned its hopes during the darker days of the region's hard-fought recovery looks finally to be taking shape. The availability of semisubmersible units, for one thing, appears very much on the minds of majors and independents alike for multiwell programs during the summer drilling season.
Yet this brightening picture may prove to be something of a short-term trompe l'oeil, if one is to judge by a recent report from Wood Mackenzie Consultants Ltd.
The Edinburgh-based analyst says there is no doubt the UK North Sea remains a highly prospective province. The 30-plus years of exploration and appraisal (E&A) drilling on the UK Continental Shelf has seen an average success rate of around 32%, a level of prospectivity upheld despite the overall decline in the number of new wells drilled since the zenith of 1990, when 167 were spudded.
Drilling bounces back
This year E&A drilling, says WoodMac, has "bounced back" from the record low levels recorded in 2000, with 5 exploration and 4 appraisal wells already drilled in 2001, as compared with 3 and 2, respectively, for the whole of the first quarter last year.
Moreover, a survey of 33 upstream companies active on the UKCS carried out by WoodMac to gauge operator drilling intentions suggests some 44 E&A wells will be drilled this year. With estimates of postulated reserves still to be found in the region ranging upward from 20 billion bbl, all should be right in the UK North Sea offshore industry's admittedly changing world.
The unfortunate rub for the pro- vince becomes clear when looking at the medium-term outlook. The fundamental change to UK North Sea economic thinking-which made extant offshore infrastructure key to the region's "ultimate recovery" plans-combined with the worldwide industry trend toward consolidation, leaves it on the horns of a dilemma.
Longer term hopes
The recent focus of E&A and development capital on core infrastructural hubs, as practiced by the likes of Talisman Energy Inc., is incontrovertibly central to unlocking additional UK sector reserves "as it serves to upkeep the vast network of infrastructure available to access future opportunities," notes WoodMac.
"However, the recent trend of industry consolidation and the dynamic asset market in the region has shifted the focus of those players involved away from the organic growth opportunities that remain on the UKCS in the form of true exploration," said the analyst.
Not surprisingly then, the lion's share of E&A drilling on the UKCS has been ordained for the central North Sea, the area with the most extensive infrastructure, as operators search out and appraise "near-field" satellite tie-back candidates.
WoodMac fears, quite simply, that without a return to meat-and-drink E&A activity, industry's desire for the fullest exploitation of those tens of billions of barrels under the UK North Sea might be left frustrated.
The further irony, though, is that this concentration on value-added development opportunities and asset marketing that is currently derailing drilling may, down the road, serve the UK oil and gas business well, by providing "flexible niche players" and the industry at large the chance to undertake true exploration in the longer term.
