DTI/PILOT Initiatives to Promote Exploration and New Field Development

The DTI work on undeveloped discoveries and low deliverability reservoirs (see SPE 78331 "Unlocking the Potential from UKCS Low Deliverability Reservoirs" by Colin B Cranfield, UK Department of Trade and Industry and Peter Naylor, AEA Technology plc, http://www.dti-sharp.co.uk under Dissemination/Journal and Conference Publications) has been incorporated into the fallow blocks/fallow discoveries initiative, one of a number of mechanisms that have been implemented to promote a more active exchange of licences and stimulate exploration and development activity.  Here Colin Cranfield (colin.cranfield@dti.gsi.gov.uk), Senior Reservoir Engineer at the DTI's Oil and Gas Office in Aberdeen discusses these initiatives.  Further information is available on these websites (http://www.og.dti.gov.uk, http://www.pilottaskforce.co.uk, http://www.indigopool.com/publicchannel/uklift). DTI contact names are provided at the end of the article.

The intent of the fallow blocks/fallow discoveries initiative is to ensure that acreage and potentially economic developments are being actively worked. Where there is little significant activity, the assets are advertised to enable anyone to approach the current Licensees with a plan to undertake activity, which should lead to drilling or development in a reasonable time frame. Those Licensees not wishing to progress will transfer their interests to other companies to carry out the plan.

Figure 1: Fallow process (Click image for larger view)

Figure 1 gives a generic overview of the fallow process (the process varies in time and ultimate outcome depending on whether blocks or discoveries are being considered).

Each year the DTI will draw up a list of blocks and discoveries that it considers to be fallow. Those where a technically competent group is doing all that would be expected will be classified as “Class A”. Those where the current Licensees are unable to progress towards activity due to partner misalignment and/or commercial barriers will be classified as “Class B”.

Meetings are held with all Licensees who wish to make representation on the proposed classification, but the final decision lies with the DTI. The process commenced in early 2002, with the final classifications notified to the companies by early November. There is then a three month period within which the group may generate a plan of activity, following which, if the asset remains classed as Fallow B, it will be released onto LIFT (Licence Information for Trading) "Fallow Asset Register". The first batch of assets (19 Fallow Blocks and 20 Fallow discoveries) was placed on the web site in September 2002. The DTI has notified companies of a further batch with no significant activity, to be released in February 2003.

This fallow initiative should help move undeveloped discoveries forward to development. There has already been an early impact - since April 2002, 20 discoveries are no longer fallow:

• New seismic data has been acquired on 6 discoveries.
• 4 discoveries have been included in approved field developments.
• There have been 4 appraisal well spuds on fallow discoveries.
• 7 blocks with fallow discoveries have been relinquished and will be offered in the 21st Licence Round.

Similar impacts can be registered on blocks. 90 are no longer fallow:

• New seismic data has been acquired on 28 blocks.
• Field developments have affected 19 of the blocks.
• 6 wells have been drilled on fallow blocks.
• 33 blocks have been relinquished and will be offered in the 21^st licensing Round.

Other examples of activities intended to promote exploration and new field development include:

• Shortened licence terms for new licences, to speed up activity.
• A clearly laid-out approach that the DTI would follow if called upon to settle a dispute relating to third party access to infrastructure (i.e. if this were identified as a potential barrier to exploration and/or development. To date, the DTI has not been requested to intercede in any dispute).
• DTI issued a consultation document on the possible introduction of “Promote” licences in late 2002. Following feedback from industry, the advent of  “Promote” licences was announced in early February 2003. These will differ somewhat from the traditional production licence; licensees will be able to work up ideas and potential prospects during an initial period, without a heavy financial commitment, and thereby earn the right to gain an exclusive interest in a full production licence. It is intended that this will maximise the attention paid to UKCS prospects and so increase successful drilling activity.
• The wider availability of technical data is seen as another route to improving UKCS competitiveness. DTI is currently commissioning studies covering several quadrants in the central North Sea, with a focus on HPHT, the Chalk and Tertiary aquifer flux. DTI is also helping progress a PILOT initiative on data rationalisation industry-wide.
• A UK-Norway cooperation work group was established to focus on key areas (transportation and infrastructure, operational synergies, mutual open-market access, PILOT/KON-KRAFT liaison), particularly the optimal use of infrastructure. Benefits will be new reserves and an enhancement of the life of existing developments. The work group has recommended measures to enhance the efficient operation of the market between the two countries.

PILOT specifically set up a “Progressing Partnership” work group (PPWG) in March 2001 to address commercial and other behavioural barriers to UKCS development. A PILOT sub-group launched a new commercial code of practice in early 2002, which is designed to remove many of the previous contractual/commercial road-blocks. A DTI-sponsored study looking at issues underlying the uptake of technology on the UKCS is drawing to a close, this will inform the debate and hopefully lead to increased technology uptake.

Industry is progressing a number of Brown field initiatives, with assistance from LOGIC (Leading Oil and Gas Industry Competitiveness) (http://www.logic-oil.com) (e.g. Brown field showcase events, focus workshops and bench-marking studies).

The Industry Technology Facilitator (ITF) (http://www.oil-itf.com) is in the process of launching projects designed to improve the resolution of seismic imaging and overcome problems related to low permeability reservoirs. The selected projects will have the backing of operators and link directly to actual reservoir situations.

Focussed industry show-case events will continue to be held; perhaps, in the future, one focussed specifically on low deliverability/undeveloped discovery issues and enabling technologies.

Thus, we see that a number of strategies are already in place which should help overcome many of the barriers to development of a large number of UKCS low deliverability undeveloped discoveries.

Figure 2: Potential timeline (Click image for larger view)

Looking forward (Figure 2), we foresee an increase in activity as fallow discoveries and blocks are made available to companies that are more focussed on drilling or development. We also foresee the rise of specialist contractors that are keen to engage with enterprising companies to reach novel commercial and technical solutions, to overcome the barriers. We may see the advent of specialist services such as hydraulic fracturing and under-balanced drilling from mobile vessels.

Government and industry will continue to co-operate to improve business efficiency. It is hoped that initiatives such as ITF-launched technology innovation projects will lead to the development of new tools and techniques. This should take us a long way to achieving the PILOT targets for 2005 and 2010

So, there are still plenty of opportunities out there despite the fact that the North Sea is a mature, relatively high cost province.

DTI contacts

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