Future Export Potential of the UKCS Resource

This year’s Hannon Westwood talk at PROSPEX 2011 highlighted the potential loss of oil and gas hubs and access to pipelines on the UKCS over the next ten years.  This is based on a view that the large expansion in diverse ownership and the unaligned nature of drilling activity in any one area adds to uncertainty in hub investment and, in consequence, works to erode the hub/pipeline network.  This report can be read in conjunction with the slides presented at PROSPEX.

The UKCS has produced around 40 billion boe to date and contains a further technical risked upside of around 20 billion boe.  The forecast in this report is based on an assessment of over 2,300 entities including undeveloped discoveries and undrilled prospects split into 15 billion boe of future resource in E&A and some field enhancements and 5 billion boe in current producing fields.

View the full short summary here: A short commentary on Hannon Westwood’s Presentation at PROSPEX 2011

A presentation on the future export potential of the UKCS Resource - A 2020 Forecast

This year’s report to Prospex concerns the growing need to address concerns over the future condition and coverage of the UK’s offshore hub and pipeline system. Companies investing in the North Sea have reaped the benefit of wide pipeline coverage for maybe 30 years or so. The presence of export options has not, in itself, been a key issue.

Our analysis of a wide range of data, including over 2300 prospects and discoveries, suggests that all this may be about to change, and this presentation shows what we feel the next ten years will look like in terms of hub coverage and access to pipeline systems. We calculate that at least 3 billion of oil may be fall outside the periphery of hub capture, and that large swathes of the Gas Basin, Outer Moray Firth, and the Central North Sea may start to show gaps in coverage.

Our conclusion is that the explosion in numbers of companies active in the North Sea has resulted in unaligned ownerships and unaligned investment on acreage and, in turn, has undermined the ability of industry to develop effective long term cost sharing arrangements for hubs. As a result, many hubs may close prematurely. New technologies may reduce this effect by way of offering single developments to individual properties, but our first concern here is to highlight the opportunity to offer smaller, less robust properties, the chance to benefit from collective solutions rather than standalone; or to alert the owner of the need to assess export options as part of their acreage evaluations, long before first drilling commences

Jim Hannon's full presentation can be viewed:  The Future Export Potential of the UKCS Resource - A 2020 Forecast

A Short Commentary to Accompany the Presentation is available:  A short commentary on Hannon Westwood’s Presentation at PROSPEX 2011

Tuesday, January 04, 2011

On 2nd April 2009, the third of the GeoControversies debates took place at PGC VII, the seventh ‘Barbican Conference’. The debate was ‘This house believes that the North Sea is finished’. "Speaking against the motion was Jim Hannon, co-founder and managing director of Hannon Westwood, who strongly believes that there is a future for exploration in the North Sea. The audience was in agreement, voting overwhelmingly against the motion.

A full transcript of the debate is available: The Geological Society GeoControversies Debate

Hannon Westwood Presentation at the Atlantic Ireland Conference, Dublin - 2 November 2010

Prospects for Atlantic Ireland and comparison with neighbouring UKCS by Andrew Vinall

"The Irish Atlantic Margin covers an area nearly one and a half times that of the UK equivalent yet since offshore exploration commenced the UK has enjoyed significantly more attention by the oil companies than Ireland. Of the 154 wells drilled in Irish waters over the last 38 years only 52 have been drilled in the Atlantic region and the majority of these have been restricted to the northern part of the Porcupine Basin. This compares with 200 drilled in the Atlantic sector of the UK, a fourfold difference. Since drilling in the Atlantic Margin commenced in 1972, there have been only 2 years when there has been no drilling activity in the UK, against 18 in Ireland. There have been 7 years when Atlantic drilling in Ireland exceeded or matched that of the UK.

If a comparison is made between exploration success against volume of hydrocarbon resource found it can be seen that around 2.7 tcf gas and 220 mmbbls oil have been discovered in Ireland by 41 wells compared with 4 tcf gas and 2000 mmbbls oil discovered in the UK by 148 wells. A measure of success of an area can be taken as the volume of hydrocarbon discovered per well. Although the number of discoveries in Ireland lags behind that of the UK, the two areas compare favourably with Ireland returning 16.4 mmboe/well against the UK’s 17.8 mmboe/well.

The reason that Ireland has not enjoyed the same level of activity as the UK must be down to other factors and in part this must be a perception of risk linked to uncertainty over the potential of the various basins. One striking difference is that of the 32 UK discoveries two-thirds, containing 80% of the reserves, are in the Palaeocene, whereas all 6 of Ireland’s discoveries are in the Mesozoic and while this is a reflection of the primary objectives of the exploration wells, it is also noted that in Ireland there has been only limited encouragement from the handful of wells that have targeted the Tertiary.

Both regions contain a number of mapped, but undrilled structures, which could be considered to give an indication as to the unrisked yet-to-find potential. In Ireland the mapped potential in 74 prospects is around 20 billion boe of which around 75% is pre-Tertiary, whereas in the UK it is 19 billion boe in 107 prospects of which nearly 60% is in the Tertiary.

The conclusion is that there is significant remaining potential in both regions, but that with higher competition for acreage in the UK, Ireland has the potential to offer greater scope for exploration and to an extent this is supported by lower taxes on production. This, however, has to be tempered against the perception of risk in Ireland and internal company barriers to new country entry.

Atlantic Ireland Conference 2010, Dublin

For a copy of the full presentation please contact:
Karen Alford
karenalford@hannonwestwood.com
Tel: +44 (0) 141 534 7903

Hannon Westwood launches it’s “Discovery Tool” the unique UKCS Oil & Gas resource database

Hannon Westwood, leading UKCS intelligence and business development consultancy, has launched its ‘Discovery Tool’, the first interactive web based software to present technical and commercial data and interactive analysis on all 450+ UKCS oil & gas discoveries. "Through monitoring over 40 years of North Sea activity, Hannon Westwood has been able to develop a unique UKCS Oil & Gas resource database which spans production, discoveries and exploration. In addition to cultural, technical and default commercial metrics on each discovery, the user can apply alternative scenarios “live” in seconds - a real value added way to develop insights into assets and opportunities.

The Discovery Tool provides a new level of interaction which offers a new management tool for the UKCS for use by senior geoscientists, commercial managers, government analysts and financial institutions seeking insight into where future value and investment might lie.

Jim Hannon, Director, Hannon Westwood says: The Discovery Tool is an exciting development which will act as a valuable resource in assessing data analysis on UKCS Oil & Gas discoveries, the very part of the business that spells future growth.

– Ends –

Notes to editors:

About Hannon Westwood:

Hannon Westwood was established in 1993 as a consultancy specialising in UKCS Acreage Market Intelligence and Portfolio Management Services. Its products & services have evolved in a fast changing world of oil and gas ownership, so that its unique and comprehensive intelligence service is now supported by analytical software tools and strategic consultancy aimed at providing companies with an overview of market opportunities, competitor strategy and assisting with growth planning.

Companies investing across the North Sea from new entrants to super-majors are included in the client list.

Hannon Westwoods expertise covers three key oil & gas business build areas:

• Intelligence Services & Strategic Consultancy (HW Atlas)
• Analytical Software Tools (HW Software)
• E&P portfolio management and A&D (HW Portfolio Advisory)

Insight into non-core acreage, company strategy, oil & gas resource, deals and potential deals, is an essential part of the support and resource needed by todays E and P and Commercial Managers to work successfully in the market. Hannon Westwood has built its collective knowledge and expertise in these areas into an interactive database - GMatrix.

Directors and team members are all former oil & gas company E & P managers and geoscientists who are able to provide incisively written reports, verbal and day-to-day commentary and analyses, to support the work of the oil company manager. Analytical tools help identify assets of interest and provide technical and commercial background. Consultancy helps build fast-track analyses to display context and upside and can be combined with A&D support

For more information please contact:
Karen Alford
karenalford@hannonwestwood.com
Tel: +44 (0) 141 534 7903

Press Release: North Sea Oil Alive & Kicking

Hannon Westwood announces its 2009 UKCS North Sea Drilling Results ‘Analytical Report’.

Highlights:

• 41 wells drilled in 2009, compared with 77 in 2008
• 28 of which were successful in appraising or finding additional technical reserves, 68% success rate compared with 47% in 2008
• the success rate in 2009 was more than double the long term UK average
• 1,224 mmboe of appraised and new technical reserves found in 2009 compares with UK production of 836 mmboe = 146% technical replacement rate
• recovery in the oil price and reduction in rig rates is leading to a pick up in drilling in the 1st quarter of 2010

Please read our 2009 UKCS Drilling Report flyer for more information.

AAPG talk by Jim Hannon on 4th February 2010 in Aberdeen – “The North Sea: A Race Against Time”

"For the past six years, our firm has been building very comprehensive oil & gas resource data on field production, discoveries and un-drilled prospects; mainly to build our own detailed view of what reserves remain on the UKCS – albeit “in theory”. The answer always seems to be around 25 billion boe give or take a few billion and, more recently, we have played out theoretical drilling programmes to imagine the dynamics of this system, the timescales, the cash flow and the investments needed; plus the subsequent tax takes and jobs created.

But this dynamic isn’t everlasting, and the next step is to overlay the shutdown of pipeline and export routes and watch the upside potential being eroded, with the subsequent loss of national resource, loss of huge investment, loss of jobs and loss of tax take. In this talk, we will attempt this overlay; and we will model some simple shut-down sequences and start to quantify the scale of loss, and throw some light on the key areas (geographic or play or company size or sector). But much more work is needed to be done in our view, and in more detail, to develop a management tool or a continuous management reporting system to steer industry investment and cooperation and government fiscal stimuli - there are roles for both – and the benefits to the nation are enormous. We in HW are now getting involved in this work and developing the thinking and the software to provide insightful steers to optimise what we can of the oil & gas take.

Jim Hannon to talk to OGUK on 2nd February 2010 in Aberdeen – “The Potential of the UKCS 26th Round: Prospects and Discoveries”

The talk details the oil & gas prospect and discovery potential on offer in the 26th Licence Round and then goes on to run scoping economics on each population to outline the extent of the commercial opportunity and the potential impact on new potential project NPV and investment levels. The talk comments on the potential levels of activity expected in the Round and the impact on 26th Round oil and gas project potential using today’s oil and gas prices.