There has been significant coverage in the news about the latest UK licensing round. To backtrack, the 33rd Offshore Licensing Round officially opened on 7 October 2022 with applications closing on 12 January 2023. Almost 900 blocks were offered by the UK industry regulator the North Sea Transition Authority (NSTA) after a three-year gap. Given the failure and disappointment of many global bid rounds, it was quite encouraging for the NSTA that it received 115 applications covering 258 tracts submitted by a total of 76 companies.
…given the unusual and prolonged process, it remains to be seen how many of the licences awarded will be taken up
To date, the NSTA has announced the successful bidders in two tranches on 22 October 2023 and more recently on 31 January. These two tranches cover acreage West of Shetland and the Northern and Central North Sea. The upcoming third tranche will include acreage in the Southern North Sea and East Irish Sea. However, given the unusual and prolonged process, it remains to be seen how many of the licences awarded will be taken up. A number of companies will have changed strategy and exploration decision makers, and in some cases decided to exit the UK offshore. There is also the impact of unsuccessful drilling during this period. An example being the much-awaited but seemingly disappointing North Sea Natural Resources-operated Devil’s Hole Horst Prospect (27/05-1) on the western side of the Central North Sea, plugged and abandoned in December 2023.
Extremely low
If one looks at the applications in detail, a large number are for protection acreage. Others are applications for the same areas relinquished in recent years. Overall work commitments for the blocks involved in the first two tranches are extremely low, with most of the work being no more than desktop studies. It will come as a surprise that only one firm well has been committed in both tranches, by Shell and partner NEO Energy in Block 22/30d on the Eastern Central Graben. Total relinquished this block in 2020, located north of Shell’s Shearwater gas/condensate field, possibly targeting the Gylen prospect.
…the industry considers the relinquishment policy shortsighted.”
Mass relinquishment
In December 2023 there was a mass relinquishment of acreage in the UK offshore with over 80 licenses surrendered many of which had been awarded in the previous 32nd Round. The period following the 32nd has been a tough time and the industry considers the relinquishment policy shortsighted and extensions should have been considered for continuity. The industry and overworked NSTA have to start from scratch again under new awards and terms. Large swaths of the UK offshore now remain open and it is unclear when this acreage will next be made available. A knock-on effect of this large turnover of acreage is that there are fewer farmout opportunities available especially for exploration. Those seeking deals will need to watch closely companies successful in the 33rd Round for opportunities.
A positive note
To wrap up on a positive note, in early February 2024 Deltic Energy announced that it has farmed out a 25% stake in Block 48/08b on the Southern North Sea to Dana Petroleum, a wholly-owned subsidiary of the Korea National Oil Corporation (KNOC). The Shell-operated licence contains the Selene prospect, which remains on track to be drilled in the second half of 2024. Selene is one of the largest undrilled structures on the Permian Leman Sandstone fairway.
