Oil and gas industry backs new exploration licences

The North Sea industry has seen lower oil prices

The Oil and Gas Authority (OGA) says it is "highly encouraging" that 25 licences have been awarded to explore for oil in waters around the UK.

The licences all focus on previously under-explored regions including Rockall and East Shetland.

It is a significant fall on the last licensing round in 2014/15 in which 175 licences were issued.

But, with a major fall in oil prices, the OGA says the companies' commitment will help stimulate further activity.

The 29th licensing round is the first in 20 years which has focused solely on so-called "frontier" areas.

In previous rounds, oil firms were able to bid for the exclusive rights to explore for oil in small sections of seabed, called blocks, in any part of UK waters.

To stimulate interest in exploration after the downturn, the regulator spent £20m commissioning seismic surveys of two keys areas, including the "Mid-North Sea High" region.

The results have been studied by geologists at the University of Aberdeen who revealed earlier this month that there may be reserves around Rockall which had previously been dismissed as devoid of oil.

'Stimulate activity'

The awards issued today are for 25 licences in 111 blocks to 17 companies.

Commitments have been made to drill three exploration wells in the near-medium term.

OGA chief executive Andy Samuel said: "The £20m investment in new seismic for the Rockall and Mid-North Sea High areas, subsequent release of 40,000 kilometres of new and reprocessed data... and a stable and competitive fiscal regime has resulted in a number of quality applications in this frontier Licensing Round.

"We are particularly pleased to see firm well commitments, the targeting of new and under-explored plays, and first-time entrants to the basin, alongside a number of established companies, which will help stimulate further activity and value creation.

"While exploration activity has undoubtedly suffered as a result of the difficult market conditions, we are now seeing highly encouraging success rates and finding costs on the UKCS.

"This is testament to the value of a robust and focused exploration strategy with commitment from industry, government and the OGA."

The most recent Business Outlook from the industry body Oil and Gas UK said exploration activity "remained depressed" with just 22 wells drilled in 2016.

But it said optimism is beginning to return to the sector as costs are driven down.