FAROE Petroleum is preparing to ramp up exploration activity in the North Sea but only has plans to drill on the Norwegian side of the border where there are greater incentives on offer.
The Aberdeen-based oil and gas firm announced it has been awarded eight new exploration licences covering huge swathes of the Norwegian North Sea in the latest round.
Chief executive Graham Stewart said the licences include quality new exploration acreage in an area in which the company has made a number of finds.
Faroe made an ambitious bid for licences off Norway although the fall in the oil price since 2014 had dented many firms’ enthusiasm for exploration.
The confident approach reflected Mr Stewart’s belief in the possibility of making big finds in the North Sea.
He has noted that the cost of services such as drilling support has fallen sharply amid the deep downturn in the industry triggered by the oil price fall.
However, this has not proved to be a big enough spur to convince Mr Stewart that it makes sense to invest in drilling wells in UK waters.
The company did not bid for any acreage in the latest UK licensing round.
Mr Stewart has made clear that Norway owes much of its appeal to the fact the country provides generous tax breaks for explorers.
They can claim rebates of 78 per cent of qualifying spending.
Announcing its success in the Norwegian licensing round, Faroe provided more food for thought for ministers who are keen to try to boost exploration in the North Sea. Drilling levels have hit record lows.
The company said it has lined up a material and exciting drilling programme for 2018, which is made up of three exploration wells and one appraisal well off Norway.
Mr Stewart also highlighted plans to bring fields into production, including the Brasse find it made in the Norwegian North Sea in 2016.
The experience shows how the benefits of oil and gas companies’ success with the drill bit can filter through the supply chain.
The UK oil services sector has spent three years trying to cope with the fall out from deep cuts in spending on new developments by oil and gas companies in response to the crude price fall.
The partial recovery in the price since November 2016 has provided a boost to sentiment.
Shell cheered industry players on Monday by giving the green light to a plan to revamp the Penguins field north of Shetland with ExxonMobil, which will involve hefty investment.
However, even with another 13 UK projects in the running for approval this year the industry needs new finds to replenish the development hopper.
A range of giant projects approved during the boom that ended in 2014 have been brought onstream in recent months or are nearing completion.
Faroe has focused its recent UK investment on buying producing assets. The company has accumulated losses that it can set against the income generated from these.
Mr Stewart said last year that North Sea assets were available at attractive prices.
Faroe will operate four of the new Norwegian licences.
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