Record high oil prices spark renewed interest in North Sea oil exploration

Record high oil prices spark renewed interest in North Sea oil exploration - Forbes.com

09.06.2005, 08:22 AM

LONDON (AFX) - The UK government has issued a record number of licences for North Sea oil exploration despite UK continental shelf production being firmly in decline, as investors eye opportunities amid high oil prices.

'It has been clear for some years that the North Sea, the UK side, has reached its peak in terms of production, but there is still a lot more to be done in terms of maximising production,' said Manouchehr Takim, senior upstream analyst at the Centre for Global Energy Studies.

Energy Minister Malcolm Wicks has granted 152 licences, more than double the number of licences granted last year, and the highest number of licences to be granted since 1964, when the first licences were issued.

The government and the UK offshore producers association have done a good job in terms of maximising recovery through taxes and incentives for oil producers since the 1990s, Takim said.

One such example is the 'fallow fields' system which allows the government to grant exploration blocks to companies that will actively produce oil.

There are an estimated 25 bln barrels of oil still below the North Sea.

'Higher oil prices, of course, revive interest in oil exploration, but the reason for the record number of licences is that smaller companies with niche technology and the funds to take over such platforms are being allowed to do so', Takim said.

'The larger multinationals -- with budgets of several hundred million rather than 50 million -- explore the more costly and longer-term opportunities in Siberia and West Africa,' Takim said.