The oil and gas market on the UK Continental Shelf is undergoing a transformation. The UK hopes to keep its production rates up, but hitting the target of sustaining production at 3 million barrels per day in 2010 will be a challenge. It's not going to happen by itself - a new drive is needed, and the names to look out for aren't necessarily Shell, BP or Total.

Ian Wright, associate director at DNV, is supporting an industry that is in the process of a giant shake-up.

There are fundamental and very important changes occurring in the UK oil and gas market. Declining production, ageing installations, and the fields being developed are much smaller than they used to be.

The UK government and the Industry together are talking action to keep production rates up. However, insiders agree that hitting the target of sustaining UK production at 3 million barrels per day in 2010 and dipping no lower than 2 million barrels per day by 2020 will be a significant challenge.

The traditional, large global oil and gas companies are gradually reducing their presence and investments in the region. For some time now, companies such as Shell, BP and Total have seen their future in the larger fields in places like Russia, the Middle East and West Africa creating a space to be filled by others that specialises in tail-end opportunities.

The companies which are likely to be at the forefront of keeping production at respectable levels in the UK in the next decades are lesser-known names, such as Venture, Ithaca, Oil-Expro, Fairfield, Lundin and Nexen.

Shake-up
Already they've made their presence known in the market. They actually shook it up. These new companies are smaller, have lower baseline costs, and aim to create substantial value through a focused and pragmatic approach. They are acquiring licences, developing fields, and in some cases growing into medium-sized producers.

It used to be a good field if it was 100 million barrels. 25 million barrels is now considered a significant field, and even smaller fields are being developed.

In more recent years, the number of new entrants has skyrocketed, and as many as 150 different oil and gas companies now hold UK Continental Shelf licences. The proportion of capital invested in the North Sea by new entrants was just 10% as recently as 2003 - now it has grown to a sizable 38%. The new entrants today account for 16% of total production.
DNV's role in this development is to safeguard life, property, and the environment, and at the same time assist new entrant to improve their business performance. These companies are the future of oil and gas in the UK.

Date: 2008-02-11