Monday, 11 January 2016

Exploration Watch - West of Shetland

By Elaine Reynolds

West of Shetland remains the least-developed area of the UKCS despite the first significant discovery occurring there almost 40 years ago. A combination of technical challenges means the region has remained relatively immature, with an estimated 95% of resources yet to be developed. Until recently only three fields, the BP-operated Foinaven/Loyal and Schiehallion, were in production. Joined in early 2016 by Total’s Laggan-Tormore gas field and Premier’s Solan project, only the latter is a notable successful development by an independent to date. However, recent  independent activity includes Hurricane Energy’s appraisal of the 207mmboe Lancaster discovery and Chrysaor’s Mustard discovery within tie-back distance of Solan.

Infrastructure is key

West of Shetland is a technically challenging region, with deep water of up to 1,500m in places and extreme metocean conditions that necessitate a restricted operating window. In addition, the region had to wait for advances in seismic technology and a build-up of detailed geological knowledge for success rates to improve in the area. The lack of infrastructure remains a key barrier to commercial success, particularly for gas discoveries, with the Laggan-Tormore gas pipeline the first in the region. However, the independents covered in this report hold licences that are clustered together and could be developed as hubs in the case of success.

Independents active in the 28th round

In the 28th Offshore Licensing round, licences were awarded to just three independent operators:
Hurricane Energy is focused on fractured basement plays in the UKCS, recognised as a key underexplored region by the Oil & Gas Authority (OGA). The company is focusing on developing Lancaster, having established commercial rates from horizontal appraisal well 205/21a-6 in 2014, and is now seeking a farm out to fund an Early Production System (EPS). Beyond Lancaster, analogous prospects Lincoln and Warwick sit within tie-back distance of the proposed EPS. 
Parkmead Group is at an earlier stage of development with prospects Davaar, Sanda North and Sanda South clustered together and with combined P50 recoverable resources of 312mmbbls. Identified from similar AVO anomalies to that seen in Foinaven/Schiehallion, work is ongoing to de-risk the prospects.
Chrysaor is a private company and operator of the Mustard oil discovery, announced in September 2015. The company is reviewing the well data before releasing any resource estimates. Mustard sits 15km east of the Solan development and could be tied back in the case of commerciality.

West of Shetland: Remains underdeveloped

Exploration drilling began in the West of Shetland area in the 1970s, with the Clair field being the first significant discovery in 1977. Even so, it was another 20 years before any oil was produced
from the region when the Foinaven and Schiehallion fields were brought onstream in 1997 and 1998 respectively. To date these remain the only fields in production West of Shetland and all are
operated by supermajor BP. By early 2016, however, two further fields are due to come onstream; Premier Oil’s Solan field and the region’s first gas/condensate development, Total’s Laggan/Tormore. Meanwhile, the sanctioning of Chevron’s 240mmboe Rosebank, believed to be the largest undeveloped discovery West of Shetland, was postponed in 2013 while the company looked at ways to reduce development costs.

Please see the full note available on the Edison website: Full note available here

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