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Drilling was plentiful in the UK Continental Shelf during this year’s 2Q, according to a report by the Deloitte finance and consulting firm. However, not all areas of Europe saw increased activity.
A ramp-up of offshore activity, especially by small- and medium-sized independent E&P companies, sent drilling activity in the UK Continental Shelf (UKCS) skyrocketing in 2Q 2012, jumping 64% compared to the same quarter last year.
The number of wells spudded this year across Northwest Europe overall saw a 17% gain, with 35 exploration and appraisal (E&A) wells for 2Q 2012 compared to 30 last year at this time.
The findings were released recently by Deloitte’s Petroleum Services Group.
“We traditionally experience a rise in activity during the summer months; however, this year’s spur of activity reflects a higher year-on-year increase,” Graham Sadler, managing director of Deloitte’s Petroleum Services Group, said in a news release. “We have some way to go before we are back to the levels seen in 2009 and 2010; however, the positive announcements in the government’s March budget with regards to the extension and change in field tax allowances should encourage further exploration, appraisal, and development activity.”
RWE Dea UK, for example, started development drilling at Breagh field on the UKCS, with first gas expected in the second half of this year. The company also spudded its first development well in the Clipper South gas field in the UKCS this year. There, RWE hopes to find success in producing in Rotliegendes tight gas sands.
With the UK Department of Energy and Climate Change’s 27th licensing round attracting a record number of applicants, Deloitte predicts more E&A movement from companies. Some 2,800 blocks are expected to be offered.
“With an improved fiscal environment and steadily high commodity prices, it is reasonable to assume that we will see an expansion on the exploration campaigns started during the last quarter,” Sadler said.
Thirty-five E&A wells were spudded in Northwest Europe, an increase of 40% for 2Q compared to 1Q 2012, according to the report. Most of the wells, 18, were drilled on the UKCS. Those 18 wells are in the Central North Sea, Northern North Sea, Moray Firth basin, West of Shetland, Southern North Sea, and East of Shetland.
However, not all areas across Europe witnessed an increase. In Norway, only eight E&A wells were drilled during 2Q, down from 12 in 2Q 2011. The reasons for the downturn included economic constraints and delays among other factors.
“Wider economic constraints still exist across Europe with the ongoing Eurozone uncertainty still affecting equity markets,” the report said. “In addition, there have been fewer exploration and appraisal wells drilled this year compared to last year due to delays in starting up new drilling operations as well as ongoing drilling operations taking longer than anticipated.
“Many of the exploration targets this year have been in geologically more complicated plays and therefore have taken longer to complete,” according to the report. “There has also been an increasing focus into well testing and seismic data acquisition in areas less explored.”
Factors negatively impacting the figures don’t stop there.
Some wells are being delayed because new rigs are being built later than planned in an already tight market. Average rig utilization across the North Sea has jumped to 88% during the first half (1H) of 2012, compared to 79% in 1H 2011, according to the report.
In The Netherlands, low activity prompted the Dutch government to offer incentives, such as tax breaks and a licensing round, to boost movement. There, only four wells have been drilled this year, compared to seven for 1H 2011.
For some areas, no wells have yet to be spud – Denmark, Greenland, and Ireland. The lack of activity is typical for some areas, like Ireland, which generally spuds one well a year.
“However, increased interest has been seen offshore Ireland in the Celtic basin, encouraged by some recent success by Providence Resources’ Barryroe oil discovery which has been continually showing improving test results throughout 2012,” the report said.
Located in the North Celtic Sea, Barryroe has six wells with oil and gas present.
“This could drive companies to explore offshore Ireland where there is shallower water and lower associated costs compared to the higher deepwater risks off West of Shetland.”
An increasing number of fields being approved for development by the Norwegian and UK governments also could boost exploration, particularly in the North Sea. The report showed fields granted approval jumped to 18 in 2012, up from eight in 2009. So far this year 12 fields have received approval.
“Despite the maturity of the region, a wide range of companies have committed to making significant investments in the area in the coming years highlighting that there is confidence in the oil and gas potential of the region,” the report said.
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