Friday 19 January 2001

UKOOA - Backed Initiative Brings Life to North Sea Exploration

An initiative sponsored by the UK Offshore Operators Association (UKOOA) to stimulate exploration activity on the UK Continental Shelf (UKCS) by encouraging oil and gas companies to participate in new partnership arrangements is launched today on the world wide web (Wednesday, 17 January).

Exploration LIFE (Lift Inspired Farm-in Event) aims to promote exploration by inviting companies to come forward with fresh ideas that will generate new seismic and drilling activity and ultimately, it is hoped, new oil and gas developments.

The scheme is supported by the Department of Trade and Industry, Brindex (Association of British Independent Oil Exploration Companies), the Non-Operators Forum and PILOT, the government and industry initiative chaired by Energy Minister Helen Liddell.

Details of 12 blocks have been posted on a specially created area of the LIFT website (www.uklift.co.uk), with a further nine expected to be released over the next two weeks.

Companies have until 17 April to submit their proposals which can either be in the form of work programmes or funding in return for an equity stake. Bidders can expect to hear by mid May whether their proposals have been successful or not.

Mark Sawyers, chairman of UKOOAs exploration committee for 2000, said: The LIFE initiative breaks new ground in that existing co-venturers have agreed either to farm-out or to fund their share of the best work programmes proposed. More significantly, they have also agreed in principle not to exercise their pre-emption rights on the business opportunities the initiative will create. This will help to streamline access to UK acreage for new entrants and start-ups, as well as providing opportunities for companies to come forward with innovative technologies and fresh ideas, such as using ocean bottom cable seismic surveying for example, or cost-effective multi-well programmes and prospect clusters.

James May, UKOOAs director general, said; Exploration is one of the mainstays of our industry and UKOOA recognises the need to boost activity in this area to replenish industry reserves in the longer term.

There are believed to be significant reserves still to be found on the UKCS, he added, and the LIFE initiative is a means of encouraging exploration that may not otherwise have happened. UKOOAs exploration committee is also currently working on a number of other ideas to revive activity, including the possibility of drilling joint industry stratigraphic wells.

The successful bids will be published on the LIFT website. It is hoped that seismic or drilling activity on at least five of the blocks will emerge from the initiative within the next 18 months.

Note to Editors

1. What is Exploration LIFE?

Exploration LIFE (LIFT Inspired Farm-in Event) will bring together a group of oil and gas exploration business opportunities under the LIFT (www.uklift.co.uk) umbrella but unlike LIFT, the option to participate will be limited to a fixed period of 90 days.

An initial 12 blocks will be offered through the initiative, rising to a total of over 20. Bids are being invited for fully or partly funded work programmes in return for an equity stake. All are blocks with no firm activity planned for 2001or where proposed exploration activity is not supported by all licensees.

2. Who will administer Exploration LIFE?

The companies offering the blocks through the LIFE initiative will administer the bids on a licence by licence basis.

3. What blocks are being made available through the LIFE initiative?

Full details of the blocks on offer are available on the LIFT website (www.uklift.co.uk). The blocks are principally located in the southern and central sectors of the North Sea, as well as in the frontier areas west of Shetland. They cover a range of exploration opportunity types and have been included to give the industry the opportunity to find technical or commercial solutions to issues which have been holding back activity in the short term.

4. What is the estimate of reserves still to be found on the UKCS and what is the industry doing to make these viable?

Most analysts agree that significant reserves are still to be found, with some estimating in excess of 10 billion barrels of oil equivalent. In the North Sea, new or revitalised plays continue to appear and new technology can reveal prospects that have been missed so far. Elsewhere in the UK, particularly in the Atlantic Margin, several basins remain virtually unexplored despite proven potential for hydrocarbons. Ever improving drilling and production technology continues to reduce threshold economic field sizes and to increase tieback distances.

5. What is the UKCS exploration drilling history in recent years and why?

In 1998, 60 exploration and appraisal (E&A) wells were drilled. Activity fell to 30 wells in 1999 before rising slowly to just over 40 in 2000. These figures are well below the levels seen in the mid 1980s to early 1990s when 150 to 250 E&A wells were drilled each year.

The fall of crude oil prices at the end of the decade had a significant impact on activity but there are other factors involved, particularly the opening up of new competing oil and gas provinces such as Kazakhstan, Algeria and Brazil.

There are also issues related to the increasing maturity of the North Sea where prospects may be small compared with the past (on average between 30 to 50 million barrels of oil equivalent), and more technically challenging, leading ultimately to issues of economic viability.

For more information, please call 020 7802 2400.