How to solve a problem like the North Sea
In mid February, a fishing boat sank off the coast of Yell, Shetland (Scotland) and came to rest very close to a gas pipeline. The creel boat lay within metres of BP’s Magnus EOR gas pipeline, which transports gas to the Magnus field to help with oil extraction. The pipeline was unharmed, but the coast guard set up a 500 m exclusion zone around the site, as a precaution.
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The Shetlands have been making headlines this month for other reasons: new gas fields are expected to boost supply now that Total has opened its £3.5 billion Shetland Gas Plant. Gas from the Laggan and Tormore fields, which are located 125 km north west of the Shetland Islands (on the edge of the UK continental shelf towards the North Atlantic ocean), are now linked up to the plant. Gas is transported towards the Scottish mainline via a pipeline. The plant, which is said to have been the biggest construction project in the UK since the London Olympics in 2012, will produce 90 000 boe/d. The two gas fields are estimated to hold a 20 year life expectancy and the plant, which lies to the east of the Sullem Voe Terminal, will provide 8% of the UK’s gas needs.
This is a rare boost for the North Sea oil and gas industry, as it experiences a difficult era: some 65 000 jobs have been lost since 2014, according to reports. Drilling is at an all-time low, reduced exploration activity means that new finds are few and far between and existing reserves are becoming depleted, with little money spare to invest in what reserves are left to be eked out.
A new strategy from the Scottish government has been released early this year, entitled ‘Maximising Value’. It details the changing commercial and regulatory environment that the sector must tackle head on. It suggests that North Sea participants can weather the storm by forging new technologies and expertise in areas such as subsea testing, asset integrity, digital operations and, crucially, decommissioning operations.
Taking a different view, Premier Oil CEO Tony Durrant appealed to the Oil and Gas Authority (UK) to force companies to keep pipelines open during times of low oil prices. He said: “The authority is a new body and I’m not sure it has all the legislative powers it might need to bang heads together … It is important we have some overriding authority that could impose solutions if necessary.” He went on to say: “In other countries it would be understood that the host government has an enforcing role.” Warning of the dangers of decommissioning too soon, Durrant argues that any parties shutting facilities that they share with other producers would prematurely sideline oil and gas fields, leaving the sector in a vulnerable position when oil prices begin to rise again.
Analysts have also warned of the dangers of slowing things down too quickly. Douglas-Westwood predicts that a quarter of production facilities could close over the next 10 years, and Wood Mackenzie says that the UK is the country third most likely to see its fields permanently shut down as a result of low oil prices.
The National Subsea Research Initiative (NSRI) has recently called on the industry to collaborate on unlocking the potential of small pools of hydrocarbons in the North Sea. Dr Gordon Drummond, Project Director of NSRI says: “Solving the small pools challenge could yield a reward potentially greater than predicted with regards to the domestic market. It would enable the already capable UK supply chain to export its knowledge, products and services to international markets, thus safeguarding jobs, revenue and maximising economic recovery from the North Sea.” In this version of events, the UK becomes the ‘go-to’ nation for boosting, bolstering and buoying up faltering production. The North Sea might not know how to kick start things again in the current climate, but it sure can wind things down with style.