1. business and industrial
2. energy
3. oil

SPECIAL REPORT
UK
11th December 2013
The UKCS 28th Round: What do we already know
about its potential prospectivity?
Or
The Past is the Key to the Future
PROSPEX 2013 Presentation
DECC PROMOTE CD 2014
Hannon Westwood has been advising the oil and gas industry since 1993 and provides a wide-range of
intelligence and business development services underpinned by proprietary data systems. A team of
experts offers clients unparalleled industry knowledge, commercial expertise and geo-commercial
understanding.
NOTE - This report is based on meetings and conversations plus scout information and some speculation. Accordingly, while every care is taken in
the preparation of these reports, no investment decisions should be taken based on their content. Potential investors should make their own
independent investigations and assessments before doing so. Information is strictly confidential and neither the source nor the content should be
divulged to third parties.
28th Round – Known Potential
Special Report
BACKGROUND
th
The next UKCS Licence Round, the 28 , is anticipated to be opened during January 2014. Since the
start of the Fallow and Promote initiatives in 2003 there have been seven Licence Rounds on the
UKCS. Although there were some areas that were excluded from the first of these Rounds due to the
necessity to conduct progressive Strategic Environmental Assessments (SEAs), the number of SEAs
th
has increased to the point that by the 26 Round in 2010 all open acreage with a few exceptions
resulting from logistical, environmental or military restrictions were available and are now routinely
offered for licensing. Environmental considerations have caused each of the last three Rounds to be
awarded in two phases as further assessment has been required for more environmentally sensitive
areas – a particular cause of delay to awards in the Southern North Sea (SNS) and, to a lesser extent,
in the East Irish Sea (EIS) and Inner Moray Firth (IMF).
PAST ACREAGE OFFERINGS
nd
23 Round
th
25 Round
22 Round
24 Round
© HW Atlas Ltd.
rd
th
Page 1
11 December 2013
NOTE - This report is based on meetings and conversations plus scout information and some speculation. Accordingly, while every
care is taken in the preparation of these reports, no investment decisions should be taken based on their content. Potential investors
should make their own independent investigations and assessments before doing so. Information is strictly confidential and neither the
source nor the content should be divulged to third parties.
28th Round – Known Potential
Special Report
th
27 Round
th
26 Round
th
Much of the acreage that will be on offer in the 28 Round, particularly in the less frontier areas, has
been licensed once, twice or occasionally even more over the last ten years with successive licence
groups often identifying the same prospects though, hopefully, providing a more accurate definition of
the risks involved. The application of new geological ideas, the acquisition of better seismic data, such
as the recent advent of Broadband seismic acquisition, and advanced processing techniques can all
result in step changes to the understanding of a prospect and whether it can be matured for drilling.
nd
th
Virtually all of the currently unlicensed acreage that was offered in the 22 to 27 Rounds has been
available for licensing at some stage in the last ten years. Over that period the oil price has increased
significantly, as have costs, while the gas price has exhibited a more sluggish improvement. The
inference of this is that what was sub-economic in 2003 might now be considered commercial.
The maps to the right and below
show the acreage available for
application in the mature and
semi-mature areas of the UKCS
th
in the most recent Round (27 ).
The very limited area of pale blue
shading indicates the acreage
that has not been available for
application in the last ten years.
The other colours correlate to the
colours in the maps above.
West of Shetlands &
Northern North Sea
For the West of Shetlands
(WOS),
acreage
was
last
nd
available for licensing in the 22 ,
th
th
th
th
24 , 25 , 26 and 27 Rounds
while for the Northern North Sea
(NNS) the last availability of
th
acreage was mainly in the 25 ,
th
th
This
26 and 27 Rounds.
reflects a more rapid turn-over of
acreage as a consequence of the
availability of Promote rather than
Frontier licences.
© HW Atlas Ltd.
Page 2
11 December 2013
NOTE - This report is based on meetings and conversations plus scout information and some speculation. Accordingly, while every
care is taken in the preparation of these reports, no investment decisions should be taken based on their content. Potential investors
should make their own independent investigations and assessments before doing so. Information is strictly confidential and neither the
source nor the content should be divulged to third parties.
28th Round – Known Potential
Special Report
In the most popular area for
licensing, the Central North Sea
(CNS), acreage was last mostly
th
th
available in the 25 , 26 and
th
27 Rounds. There are still
some extant licences from the
nd
rd
th
22 , 23 and 24 Rounds,
indicating that there has been
some success warranting the
retention of licences. There are
a few areas that will be
th
available in the 28 Round for
the first time in ten years, which
should generate some extra
interest.
The SNS shows a wide range
of acreage that was last
available for licensing in the
nd
th
th
th
th
22 , 24 , 25 , 26 and 27
Rounds. This is likely the result
of Fallow pressure bringing
acreage forward for application
that had not been on the market
since the mid-1960s. Recent
relinquishments have resulted
in a few new areas becoming
unlicensed that have not been
available for licensing in the last
ten years. Note that several
nearshore
areas
have
outstanding
environmental
restrictions which could result in
their only being accessible for
drilling
from
an
onshore
location.
Central North Sea
Southern North Sea
The EIS is a special case as an SEA was not
th
completed until the 24 Round in 2007. There
are also outstanding environmental restrictions
relating to the offshore extension of the Solway
Firth and elsewhere along the coast.
East Irish Sea
© HW Atlas Ltd.
Page 3
11 December 2013
NOTE - This report is based on meetings and conversations plus scout information and some speculation. Accordingly, while every
care is taken in the preparation of these reports, no investment decisions should be taken based on their content. Potential investors
should make their own independent investigations and assessments before doing so. Information is strictly confidential and neither the
source nor the content should be divulged to third parties.
28th Round – Known Potential
Special Report
CURRENT HANNON WESTWOOD DATABASE
Hannon Westwood has collated a database of undrilled prospects and undeveloped discoveries. After
revisions related to more recent interpretations and updates for drilling, there are currently over 2,000
undrilled prospects and close to 500 undeveloped discoveries in the databases. Of these about 700
undrilled prospects and 100 undeveloped discoveries lie in currently unlicensed acreage. As further
th
acreage is relinquished in the run-up to the announcement of the 28 Round, currently expected in late
January next year, these figures will increase. For the purpose of this review, the Blocks subject to
th
further assessment from the 27 Round have been excluded. These Blocks should either be awarded
th
in the second phase of 27 Round awards or, if not, then will either be released to become available
th
for the 28 Round where they will face the same environmental challenges or could feasibly be
removed from the acreage pool if considered to be unawardable.
All information has been derived from non-confidential sources such as farm-out flyers, company
operational updates or websites, relinquishment reports on the DECC website, DECC Promote CDs,
IPO documents, company meetings, scouting etc. Sometimes the detail is as sketchy as a blob on a
map but, at one time, they were interpreted as a prospect or lead and believed in by a geoscientist.
Indeed some of the prospects have no resource estimate assigned but they are still recorded and
additional information is added if and when it becomes available.
POTENTIAL IN UNLICENSED ACREAGE
Currently unlicensed
previously mapped
prospects
© HW Atlas Ltd.
Currently unlicensed
undeveloped
discoveries
Page 4
11 December 2013
NOTE - This report is based on meetings and conversations plus scout information and some speculation. Accordingly, while every
care is taken in the preparation of these reports, no investment decisions should be taken based on their content. Potential investors
should make their own independent investigations and assessments before doing so. Information is strictly confidential and neither the
source nor the content should be divulged to third parties.
28th Round – Known Potential
Special Report
If the distribution of the approximately 700 undrilled previously mapped prospects and around 100
undeveloped discoveries by area in the maps above is considered, the geographical distribution of
each is:
NNS
CNSN
45
CNSS
SNS
WOB+EC
WOS
NNS
CNSN
CNSS
SNS
WOB+EC
WOS
3
52
92
4
13
33
213
238
42
77
4
Unlicensed previously mapped prospects : Unlicensed undeveloped discoveries
(Number of entities)
The gross unrisked recoverable resources for the unlicensed previously mapped prospects are 31
billion boe while for the unlicensed undeveloped discoveries are about 980 mmboe. The geographical
distribution of unrisked recoverable resources, in mmboe, is:
NNS
CNSN
CNSS
SNS
WOB+EC
4284
5352
5723
WOS
NNS
CNSN
SNS
WOB+EC
WOS
4
3
7967.5
CNSS
13
33
42
6653
2477
4
Unlicensed previously mapped prospects
: Unlicensed undeveloped discoveries
(mmboe)
By size distribution, the undrilled previously mapped prospects can be seen to have a good normal
distribution (note, however, that the ten largest, and possibly most risky, prospects have been omitted
from this distribution:
600
Gas (mmboe)
500
Oil (mmboe)
400
300
200
0
1
31
61
91
121
151
181
211
241
271
301
331
361
391
421
451
481
511
541
571
601
631
661
691
100
© HW Atlas Ltd.
Page 5
11 December 2013
NOTE - This report is based on meetings and conversations plus scout information and some speculation. Accordingly, while every
care is taken in the preparation of these reports, no investment decisions should be taken based on their content. Potential investors
should make their own independent investigations and assessments before doing so. Information is strictly confidential and neither the
source nor the content should be divulged to third parties.
28th Round – Known Potential
Special Report
Similarly for the undeveloped discoveries, the distribution is near to normal:
70
Gas (mmboe)
60
Oil (mmboe)
50
40
30
20
10
0
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97
If these resources are then split further, by both area and by reservoir horizon, for the undrilled
prospects as an average per prospect, while for the undeveloped discoveries as a gross figure:
Area
Devonian
Carboniferous
Triassic
Permian
Jurassic
Cretaceous
Tertiary
Overall
CNSN
17.0
-
16.6
7.3
37.9
16.7
23.9
33.7
CNSS
500.0
64.2
83.3
69.8
68.3
138.6
64.5
86.4
NNS
-
40.0
15.0
-
40.1
137.8
47.8
47.3
SNS
-
13.5
11.0
10.6
-
6.4
-
11.6
WOB
-
57.7
95.5
16.0
-
-
310.3
127.2
WOS
-
-
54.5
-
31.8
67.7
123.2
85.9
All
Areas
258.5
18.8
55.8
24.9
41.3
62.4
67.4
44.2
Undrilled previously mapped prospects – average recoverable resource size by area and reservoir
Area
Devonian
Carboniferous
Triassic
CNSN
-
-
-
CNSS
-
-
NNS
-
SNS
Jurassic
Cretaceous
Tertiary
6
248.4
28.3
136.3
-
10
7
-
3.7
-
-
-
131
-
27.8
-
75.5
-
135.7
-
-
-
WOB
-
-
1.2
-
-
-
50.0
WOS
23
36
50
-
-
-
11.7
23.0
111.5
51.2
151.7
386.4
28.3
229.5
All Areas
Permian
Undeveloped discoveries - gross recoverable resource size by area and reservoir
© HW Atlas Ltd.
Page 6
11 December 2013
NOTE - This report is based on meetings and conversations plus scout information and some speculation. Accordingly, while every
care is taken in the preparation of these reports, no investment decisions should be taken based on their content. Potential investors
should make their own independent investigations and assessments before doing so. Information is strictly confidential and neither the
source nor the content should be divulged to third parties.
28th Round – Known Potential
Special Report
CONCLUSIONS
•
There is little acreage available that hasn’t also been available for application at some point in
the last ten years. There is room for new ideas and plays but…
•
There is a surprising amount of previously mapped potential that has been made publicly
available – though in varying amounts of detail
•
Re-working of the data by successive licence groups has increased understanding of the risks
on the prospects
•
Better geological understanding and better seismic acquisition and processing techniques
have led to improved understanding while improved oil prices have led to improved economics
despite rising costs
•
Costs have risen along with oil price to the detriment of gas-prone opportunities
•
At least 717 undrilled previously mapped prospects are known to lie in unlicensed acreage
with the unrisked potential for over 32 billion boe recoverable resource
•
99 undeveloped discoveries are known to lie in unlicensed acreage with the potential for 982
mmboe recoverable resource
•
Only by understanding what technical work has been undertaken and potential mapped
previously can the evaluation of a Block or area be advanced in the most efficient and effective
fashion
COMMENTARY
The UKCS has been mapped and re-mapped for nigh on 50 years although it is only in the last ten or
so years that the fruits of these mapping exercises have become more widely disseminated. To
th
understand the potential available in the 28 Round there needs to be an awareness of what has gone
previously before embarking on further evaluation. Without this knowledge it is quite likely that any
mapping exercise will result in the re-mapping of previously mapped features. By understanding the
past, future work programmes can be designed that are smart and address the key issues relating to a
prospect or discovery, be they geological, geophysical, engineering derived or commercial. Previous
interpretations that have been superseded are still retained within our records so that the evolution of
exploration thoughts on Blocks can be considered with a view to determining what further work could
best enhance the prospectivity. There remains significant potential in the UKCS but this needs a
focused approach in order to get to a commercially appropriate decision.
Hannon Westwood Special Report
Contact: Chris Bulley [email protected]
© HW Atlas Ltd.
Page 7
11 December 2013
NOTE - This report is based on meetings and conversations plus scout information and some speculation. Accordingly, while every
care is taken in the preparation of these reports, no investment decisions should be taken based on their content. Potential investors
should make their own independent investigations and assessments before doing so. Information is strictly confidential and neither the
source nor the content should be divulged to third parties.
Head Office
Charles Westwood: [email protected]
Karen Alford:
[email protected]
Hannon Westwood
100 Brand Street
Glasgow G51 1DG
Tel: +44 (0) 141 534 7903
Fax: +44 (0) 141 419 9949
www.hannonwestwood.com
HW Atlas Ltd. – A Limited Company Registered in Scotland. Company No. SC369635.
Reg Office: 100 Brand Street, Glasgow. G51 1DG.
© HW Atlas Ltd.
Page 8
31 October 2013
NOTE - This report is based on meetings and conversations plus scout information and some speculation. Accordingly, while every
care is taken in the preparation of these reports, no investment decisions should be taken based on their content. Potential investors
should make their own independent investigations and assessments before doing so. Information is strictly confidential and neither the
source nor the content should be divulged to third parties.