Despite taking the job as head of a new industry regulator, in the midst of what has become one of the industry’s worst downturns, Andy Samuel is still a man who sees opportunity on the UK Continental Shelf – but not without continued effort, from all sides.
A lot has happened since Samuel, CEO at the Oil and Gas Authority (OGA), took up his role, on January 1, 2015. A year into his job, oil prices fell to below $30/bbl. At $50/bbl, today’s industry feels more comfortable, but it is far from out of the woods. While operators have cut costs and right-sized, life is still very difficult for the supply chain, Samuel, who is giving a lunchtime talk at SPE Offshore Europe today, says.
“The industry certainly has achieved a lot in recent years; against a difficult backdrop. Over the last two years, production has increased from 1.4 MM boe/d in 2014, to 1.7 MMboe/d in 2016,” he says. “Likewise, production efficiency has increased from 65-73%. Although we still have some way to go to reach our target of 80%, this is a sign of further positive changes to come. Similarly, unit operating costs have reduced to US$16/bbl.”
The challenge will be to sustain the efficiencies that have been made, should conditions improve. Key will be “working together in new ways towards maximizing economic recovery (MER),” i.e. “making the size of the value ‘pie’ bigger,” Samuel says. “We’re clear that where there is an absence of collaboration and parties cannot agree on MER, we will use our powers,” he says. “So far, we have experienced good success in this, with 30 successes related to use of our powers.”
Still, drilling levels remain low. However, exploration success rates are high, Samuel says. “Of the 22 exploration and appraisal wells drilled in 2016, more than half were successful. We are also seeing positive signs in development drilling, with infill wells forecast to slowly pick up after 2017,” he says. Furthermore, “with an estimated 20 billion boe remaining, there is still a lot to play for,” says Samuel.
There was a “good response” to the last two licensing (29th) rounds, with 25 licenses awarded to 17 companies in the 29th round, and 12 licenses awarded to 10 companies in the supplementary round, he says. These include firm well commitments, the targeting of new and under-explored plays, and first-time entrants alongside established companies.
The OGA is encouraging exploration by making “huge” amounts of data freely available, including maps, regional studies, technical montages and a series of freely available subsurface data packages for 140 relinquished discoveries, 60 technical montages, including well and seismic data, well tops and selected seismic images. A new licensing regime has been introduced to make the process simpler and more flexible.
Use of enhanced oil recovery, to help extend field life, stimulate field redevelopments and defer decommissioning, is high on the agenda, with all new field development plans now screened to ensure EOR has been considered, says Samuel.
Asset stewardship is also core, with a benchmarking report on UKCS recovery factors due to be published. The OGA is also continuing work on understanding the cost and opportunities of decommissioning on the UKCS.
Technology also has a role, says Samuel, particularly those that could help unlock the UKCS’ remaining resources, including those in areas offered in the 30th licensing round. Here, the OGA is working with the recently launched Oil & Gas Technology Centre.
A push towards area plans, guidance on which has just been published, in order to optimise the use of existing infrastructure, is also ramping up, to encourage development of fragmented and marginal fields as clusters. Priority areas, which could have a significant impact, have already been identified. But as with other areas of the OGA’s work, operators will need to collaborate and work with the OGA. The OGA is on stand 5B40.