25th Offshore On 12 November 2008, the Department of Energy and Climate Change ("DECC") announced the results of the 25th Offshore Oil and Gas Licensing Round.
171 new licences are being offered to 100 companies covering 257 blocks of the North Sea. The 25th round included areas of the UK Continental Shelf not previously explored and blocks that were classified as "fallow". Through a joint initiative with industry, the Government has been working on measures to encourage greater investment in the North Sea, which includes innovations to the licensing system, increased emphasis on brown fields stewardship and the fallow initiative. This has resulted in high levels of interest and activity in recent years.
Energy and Climate Minister Mike O'Brien said: "We are now seeing record interest from companies wishing to exploit the UK's considerable oil and gas resources in the North Sea. Whilst there's not an endless supply of North Sea oil and gas, with up to 20 billion barrels, or more, left under the sea we can't overlook its contribution to our security of energy supply as well as to our economy."
A record number of licences have been offered to companies to extract oil and gas from the North Sea, as follows:
|
24th Round |
25th Round |
|
|
Number of Licences awarded |
150 |
171 |
|
Traditional |
79 |
124 |
|
Frontier |
6 |
6 |
|
Promote |
65 |
41 |
|
Blocks awarded in total |
246 |
257 |
|
No of Companies offered an award |
104 |
100 |
|
Of which newcomers to UKCS |
17 |
8 |
The DECC also announced that following a screening exercise, it was decided that 46 of the blocks applied for should be subject to more detailed assessments of the likely effects of oil and gas activities on certain protected nature conservation areas. A decision on whether to grant licences for these blocks will be subject to the results of the environmental assessments.
When considering the shifts in the nature of the licences and licensees from previous years, it is important to bear in mind that applications for licences in the 25th round closed on 21 and 22 May 2008, before the recent banking collapses accelerated the crisis in lending, but into the oil price spike of spring/summer. Only 7 of the licences have gone to major multinational operators, while the medium sized independents such as Nexen, Oilexco and Venture show heavily in the list. The flood of new entrants seems to have slowed, perhaps as a result of the increasing costs of development and the difficulty of the investment climate. On the other hand many of the names on the list of operators and partners are companies which have only entered the North Sea within the last couple of years. These companies are likely to find it increasingly difficult to raise finance to fund drilling and as a result larger companies with revenues from production are going to be in a good position to buy into some of this acreage by way of farm-in or takeover once it has been de-risked by further seismic evaluation.
Full details of the awards are available on the DECC website.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 13/11/2008.