UK energy minister warns of North Sea oil, gas investment, production challenges

Rising North Sea production costs and "stagnating exploration" may make it difficult for the UK government and oil and gas operators to sustain their joint targeted capital investment of £3 billion/year in the North Sea during the next 6 years, UK Energy Minister Stephen Timms has warned.

July 12, 2004

2 min read

By OGJ editors

HOUSTON, July 12 -- Rising North Sea production costs and "stagnating exploration" may make it difficult for the UK government and oil and gas operators to sustain their joint targeted capital investment of £3 billion/year in the North Sea during the next 6 years, UK Energy Minister Stephen Timms has warned.

He published these concerns in a foreword to the most recent annual report of PILOT, reported OPEC News Agency. PILOT is the joint government-industry initiative formed in 2000 to help secure long-term oil and natural gas production from the UK continental shelf.

"While the current level of capital investment in the UK continental shelf is expected to remain strong," Timms said, "forecasts suggest that meeting PILOT's 2010 production target of 3 million b/d of oil is becoming more challenging."

Finding solutions
Timms said that a concentrated joint effort by government and industry would be needed to find "innovative solutions" to help unlock the UK's remaining 31 billion boe, an amount about equivalent to the volumes already removed from the sea.

The "Promote License," "Fallow Initiative," and "Frontier Licenses" are previous solutions that PILOT promoted successfully. In 2003, for example, companies submitted offshore production license applications for 140 North Sea blocks—more than 100 more than in 2002.

In this year's 22nd offshore and 12th onshore licensing round, which closed June 4, applications were received for 4 innovative Frontier licenses, 42 Promote licenses, and 30 traditional licenses (OGJ Online, May 10, 2004).

In the second half of 2004, PILOT will complete the principles and framework of "fair third-party access to infrastructure" and will seek ways to maximize economic recovery of incremental reserves still available on the UK continental shelf.