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North Sea fields in start-up boom

THE number of North Sea oil and gas fields starting production has reached its highest level in five years in 2013, but there has been a marked fall in exploration and appraisal drilling on the UK Continental Shelf (UKCS).

The latest offshore activity report by accountancy firm Deloitte has found there was a 44% rise in fields moving into production last year, with 13 coming on stream compared with nine in 2012. It was the highest jump since 2008, when 16 new fields came into production.

Deloitte attributed the rise in start-ups to tax relief incentives from the UK Government and the high price of oil, which it said has encouraged development and production in the North Sea. Deloitte said 84% of the 13 fields brought on stream last year had been eligible for tax allowances.

In spite of the rise in start-ups, it was found the number of exploration and appraisal wells drilled in the UKCS came in at 47 in 2013, compared with 65 in 2012.

That came as the number of exploration and appraisal wells surged by 41% in the Norwegian Continental Shelf (NCS).

Graham Sadler, managing director of Deloitte's Petroleum Services Group, said the North Sea remains a "complex" area for energy firms, with the high oil price offset by steep operational costs and limited access to equipment, including rigs.

He added: "Nevertheless, we are seeing evidence that government incentives are helping to stimulate field developments - even historic discoveries - with Chevron's recent announcement that it will start work on the Alder field, which was discovered in the 1970s.

"Advances in technology have also been vital to the development of this and other historic discoveries.

"However, incentives and technology are not the whole picture. Greater overall knowledge and understanding of the North Sea's complex geology and economics also play an important role in the current viability of these older discoveries."

In other findings, the report found there had been a record 219 applications in the 27th licensing round. Deloitte said this reflected the continued interest in the North Sea and signalled its hope that similar interest will be shown in the 28th round, which launched on January 24.

Graham Hollis, energy partner at Deloitte in Aberdeen, suggested the North Sea was at a "crossroads".

He said: "We have recently seen a number of announcements of significant - and in some instances all-time high - levels of investment in UKCS. However, a number of other companies, some of whom have been key players in the North Sea sector for many years, have publicly announced or are taking steps that seem to indicate that the North Sea is no longer a core focus for investment within their global portfolios.

"Any longer-term decline in exploration and appraisal drilling will be of concern and there are measures that seriously need to be considered by industry and government to reinvigorate drilling activity and ensure the longevity of UKCS."

A full report from Sir Ian Wood on the long-term future of the UKCS is expected this week.

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