U.K. OPERATORS LOOK BEYOND MATURE AREAS

Results of the U.K.'s 14th offshore licensing round accent a growing interest by operators in acreage outside mature North Sea areas. Of 136 blocks offered in mature areas, only 27 were awarded. Two thirds of mature area blocks awarded lie in the southern gas basin, reflecting the opening of Quadrant 44 and acreage near Caister, Murdoch, and Markham field development projects, along with long term appeal of gas reserves.

June 28, 1993

3 min read

Results of the U.K.'s 14th offshore licensing round accent a growing interest by operators in acreage outside mature North Sea areas.

Of 136 blocks offered in mature areas, only 27 were awarded. Two thirds of mature area blocks awarded lie in the southern gas basin, reflecting the opening of Quadrant 44 and acreage near Caister, Murdoch, and Markham field development projects, along with long term appeal of gas reserves.

An analysis by Wood Mackenzie Consultants Ltd., Edinburgh, shows frontier acreage off Southwest England received little attention, with only one application made to the Department of Trade & Industry (DTI). A combine of Hamilton Oil Co. Ltd. and Amerada Hess Ltd. received the six undrilled blocks it applied for.

Marginal acreage received greater interest, said the analyst, accounting for nearly 80% of the blocks awarded. Fifty-nine of those lie outside the North Sea.

APPLICANTS

Sixty-two companies applied for acreage in the 14th round, with 48 receiving block allocations. Of 110 operatorships awarded, 57 went to U.S. majors, 18 to U.K. majors, 26 to independents, and nine to European companies.

U.K. independents won less than in the 12th round-25% of acreage in the 14th round compared with 61%. This reflects poor stock market perception of exploration activity and weaker cash flows due to high development spending and low oil prices, rather than the loss of petroleum revenue tax shelter, Wood Mackenzie said.

Loss of PRT relief on exploration and appraisal drilling led to many companies expressing doubts about their 14th round work programs proposals.

Seven block applications were withdrawn in the light of tax proposals and an unspecified number of applications changed, Wood Mackenzie said, most likely to make cuts to drilling commitments.

"The small number of application withdrawals suggests the budget proposals have not completely sounded the death knell for the U.K. continental shelf," the firm said.

"Indeed, some of the companies which have vociferously opposed the budget changes have sizable allocations. For example, Amerada Hess has received more blocks than any other company.

The 14th round awards involve 93 commitment wells, compared with 167 commitment wells on 74 licenses awarded in the 12th round 2 years ago.

SOME OF THE WINNERS

Esso Exploration & Production U.K. Ltd. won operatorship of four blocks in the Irish Sea. The blocks are owned 50-50 with Shell U.K. Ltd., but Esso intends to lead exploration on the blocks as it did for one well last year on Block 206/13a West of the Shetland Islands.

Shell U.K. Exploration & Production did not win operatorship of any licenses, although it was thought to have made a strong case to win a number of frontier blocks.

Chevron U.K. Ltd. won four blocks around the Welsh coast in two licenses. "We are delighted that, having made only a limited number of applications, we have been awarded our top two," said Spencer Winter, U.K. and Ireland exploration manager.

Mustang Oil Ltd., Crieff, Scotland, won operatorship of four blocks in the southern gas basin of the North Sea. These complement Blocks 43/25c, 44/21c, and 47/9c won in earlier rounds, forming a group of assets straddling the new Caister-Murdoch export pipeline to Theddlethorpe.

Many of the blocks are within 25 miles of the coast, requiring restrictions on timing of drilling and preparation of oil spill contingency plans.