UK Seeks to Work WITH Industry

Cost Base Reduction is Goal

Technology is the watchword of the day for the United Kingdom oil and gas industry.

The oil and gas business has been one of the crown jewels of the United Kingdom's economy for years, sustaining an impressive performance for over three decades - and through innovative approaches, officials mean to keep it that way.

UK officials recognize the importance of the introduction of new technologies, from rank exploration to record keeping, and are working hard to foster an environment where companies can apply new strategies and techniques to frontier areas as well as mature provinces.

"There is still a great deal of oil and gas remaining to be found and developed in the basins of the UK," said John Brooks, director of exploration and licensing for the UK Department of Trade and Industry (DTI). "There are tremendously prospective frontier areas such as the Atlantic Margin that have barely been touched.

"Even the prolific North Sea still has a great deal of potential," he continued, "but all these areas require new ideas and cutting edge technology.

"We are committed to working with oil companies so that this potential can be realized through new concepts and techniques."

And when he says working with industry he means it.

In November 1998, in reaction to plummeting oil prices, the UK government established the Oil and Gas Industry Task Force to look at ways in which the nation's oil and gas sector could be streamlined and changed to attract more investment. That effort led to changes in work programs, data provisions for drilling wells and greater transparency in the license award system, just to name a few.

Image Caption

Durdle Door, on the south coast of England in Dorset Some see a beach for sunbathing, amateur geologist see an eye-popping stone guardian to a scenic bay, explorers see an outcrop of Upper Jurassic that holds the prolific reservoir rocks found in the North Sea. Photo by Martin Pulsford. British Geological Survey

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Technology is the watchword of the day for the United Kingdom oil and gas industry.

The oil and gas business has been one of the crown jewels of the United Kingdom's economy for years, sustaining an impressive performance for over three decades - and through innovative approaches, officials mean to keep it that way.

UK officials recognize the importance of the introduction of new technologies, from rank exploration to record keeping, and are working hard to foster an environment where companies can apply new strategies and techniques to frontier areas as well as mature provinces.

"There is still a great deal of oil and gas remaining to be found and developed in the basins of the UK," said John Brooks, director of exploration and licensing for the UK Department of Trade and Industry (DTI). "There are tremendously prospective frontier areas such as the Atlantic Margin that have barely been touched.

"Even the prolific North Sea still has a great deal of potential," he continued, "but all these areas require new ideas and cutting edge technology.

"We are committed to working with oil companies so that this potential can be realized through new concepts and techniques."

And when he says working with industry he means it.

In November 1998, in reaction to plummeting oil prices, the UK government established the Oil and Gas Industry Task Force to look at ways in which the nation's oil and gas sector could be streamlined and changed to attract more investment. That effort led to changes in work programs, data provisions for drilling wells and greater transparency in the license award system, just to name a few.

However, perhaps what is most significant about the cooperative effort between government, operators and contractors is that even though oil prices have rebounded, the program has not been abandoned.

Now the program's name has changed to PILOT, but the mission is still the same: To develop strategies for reducing the cost base of UK oil and gas operators, their partners and suppliers, thus keeping the UK in the top 10 places around the world for oil companies to do business.

A Web of Opportunities

When you consider the numbers it's easy to see why this is an important effort for the UK.

The oil and gas industry has contributed nearly 20 percent of total UK industrial investment in recent years and 190 billion pounds to the national economy since the mid-1960s. The industry also supports both directly and indirectly an estimated 200,000 jobs in the country.

The Oil and Gas Task Force and its successor PILOT already have found some innovative ways to support the oil and gas business. For example, late last year a new service for trading petroleum licenses on the UK continental shelf was established on the Internet.

Licence Information for Trading (LIFT) is a Web-based, online information management initiative where petroleum licensees can advertise licenses and assets for sale, trade or farm-in.

Also, weekly updated license data and regulatory guidelines are posted on the site - a move the task force hopes will encourage more asset trading.

A complementary Web site titled DEAL also has been established and identifies geotechnical data owners, which should allow oil companies to more easily find and acquire the data they need to evaluate new opportunities.

"LIFT offers license holders a fast, low cost means to review and optimize their portfolios in line with long-term strategies," said Helen Liddell, Minister for Energy and Competitiveness in Europe. "It will allow potential investors in the UK continental shelf easy access to information crucial to their decision-making."

It also will provide opportunities to promote further exploration to exploit hitherto undeveloped reserves, she added, as well as investment in mature assets.

LIFT is supported by the United Kingdom Offshore Operators Association and DTI, and is operated on their behalf by Schlumberger Geoquest. The Web address is www.uklift.co.uk.

E-business is also being used to cut the red tape in the United Kingdom. In July the DTI announced the introduction of a Web-based system for oil production reporting, an initiative aimed at streamlining and speeding up the reporting process.

The system was tested on Shell's Eider Field and British Gas's Neptune Field - and was so successful it went online ahead of schedule.

While improving business practices is important, it's still the drill bit that's most crucial to boosting the UK's production. And, although the offshore basins are the most prolific and garner the lion's share of attention, the onshore sector has been in the news recently.

In July the UK awarded 37 licenses to 21 companies for onshore oil and gas exploration in England, Wales and Scotland - and some of the licenses included acreage that's never previously been considered.

Over 60 of the 123 blocks licensed are for exploration of coalbed methane and mines gas (vent gas and gob gas).

Of course, the 39 producing onshore fields pale compared to over 200 offshore fields, and more than three-quarters of the approximate 31 million barrels a year produced onshore comes from the BP Wytch Farm Field on England's southern coast - which is the largest onshore oilfield in Europe. However, the DTI hopes that the strong interest in the most recent onshore round will result in new production.

Officials were particularly excited about the interest in coalbed methane potential in the UK.

"The momentum for commercial extraction of coalbed methane as a valuable energy source has increased," Liddell said, "and (we hope) this will provide a further boost to this fledgling industry."

Brooks was particularly excited about the cadre of companies that have never operated in the UK before.

"New companies bring new ideas, and that's what we need," Brooks said.

"Coalbed methane is a relatively new concept here, but we are hopeful that the enormous successes that have been recorded in the United States in coalbed methane plays will transfer to regions in the UK where we have tremendous coal resources," he said.

Methane is already being produced from abandoned mines as vent gas in Nottinghamshire, but the longer term potential is from virgin coal seams. Significant production is likely to come from Westphalian seams in England and Wales and from Namurian seams in central Scotland.

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