Huge potential exists in North Sea marginal oil fields

Published at 12:10PM - 07/08/14

RMRI, the oil industry consultancy, has said that the marginal oil fields of the North Sea represent a ‘huge’ development opportunity; potentially providing a vast market of, as yet, undetermined potential.

The consultancy’s report, which was commissioned by ABT Oil and Gas, concluded that the key to realising full gains from lesser sized and scattered discoveries in the North Sea, would be technology and supporting systems. By fully unlocking these marginal fields, an additional £40 billion of oil derived revenue could be achieved.

The role of technology

Technology was described in the report as a key enabler in managing the complexity inherent in fully exploiting the more remote and smaller fields. The need for immediate technology development was identified, given the time scales required to move new innovations through development, testing and assessment phases before wider industry acceptance could be achieved. The report called upon the industry to focus on the delivery of newer technologies, as well as the refinement and further development of existing, proven solutions. Supporting systems and business models were also highlighted as critical success factors.

The ABT example

ABT is one such provider of oil drilling assets. It owns and develops a series of field solutions which amalgamate existing oil technologies. These solutions are designed to be adaptable and ready for deployment, allowing them to potentially service a range of marginal oil fields during their working life. This is a key factor for project costing and economics.

A case study

An example of this approach is highlighted in the report, with a scenario that describes one unit being deployed to three stand-alone marginal oil fields, each of which holds reserves of 10 million barrels.

The model begins with the one oil field in production for six years. When this period concludes, an eighteen month break occurs to retro-fit the SFT. This allows the second field to be ready, using the previous SFT. The same approach is taken for the remaining third field, which allows nearly 30 million BOE to be generated during a period of 21 years. In this example, £1.7 billion in revenue would be generated by this project, with fixed oil prices at $90 a barrel. Pre-tax profits would stand at £1 billion, and post-tax profits would be £555 million, after corporation tax and other deductions. This is with an estimated operational expenditure and capital expenditure of £660 million.

Changing focus

The RMRI concluded that a number of organisations were actively looking to extract full value from the rapidly maturing oil industry in the North Sea. However, no significant discoveries – defined as multi-hundred million BOE – had occurred in the past 5 years in the UKCS13. Additionally, there are no certainties that any such discoveries would be found in the future.

This suggests that the exploitation of marginal and smaller reserves is all the more important for UKCS and other mature regions, which would rely on such discoveries whilst needing to exploit them without the high-costs of conventional drilling projects. This means that a vast market now exists with attractive potential, to apply both new and market-ready technologies that will allow for early production, but with significant reductions in cost.