PwC recently released the results of their research into how the industry can sustain success in the North Sea in the coming decades, touching on key themes of technology and innovation, access to capital, collaboration and regulatory. The report incorporates the views of 30 senior stakeholders across the value chain in the UK, Netherlands and Norwegian sectors.
The general consensus is that the North Sea does have a future and genuine excitement exists among operators that there are opportunities to exploit, such as tight gas in the northern North Sea and tapping into marginal fields using advances in unmanned production technology. New plays include the fractured basement reservoirs West of Shetland as well as the “uncharted territory” of the Atlantic Margin which is to be explored and “border” region between UKCS/NCS.
However, the results demonstrate that a number of fundamental issues will need to be addressed in the next 24 months if the basin is to avoid a rapid and premature decline. The report presents a number of key suggestions to tackle these issues, taking insight from operators:
- With access to capital identified as a number one factor affecting the transformation of the North Sea, taking measures of consortium financing where counterparty risk is shared could build an area or asset approach to a project rather than a company focused one. The government should also consider setting up a decommissioning fund or guarantee which helps smaller companies cover their letter of credit requirements for decommissioning.
- The other number one factor in enabling transformation of the basin is technology and innovation to increase efficiency within the industry. Proposed solutions include a “North Sea Champion” to lead the way in innovation, best-in-class working and cooperation. The industry needs a change of mindset to work together for mutual risk/reward with cost efficiency as paramount, particularly through reducing complexity.
- A lack of collaboration was identified as a key issue hindering the sector despite all the talk, with the emphasis that cooperation has the potential to benefit all parties. The formation of a “super JV” could consolidate smaller and fragmented assets under one operator which could be suitable for consortium financing, deliver economies of scale and a coordinated approach to decommissioning.
- Governments and regulators across the basin have a must articulate the vision for the future on topics such as infrastructure, ownership, encouragement for exploration, decommissioning and the transition to low carbon.
- Finally, the maturity of the basin is encouraging greater efficiency from late life assets and provides the opportunity to develop skills which can be exported. Aligning decommissioning planning with the transformation to lower carbon sources can ensure a seamless transition and can secure our energy future.
The Chief Economist at Statoil quoted, “the North Sea is here to stay and is alive and kicking. The people who will turn off the lights in the Norwegian sector haven’t even been born yet”. We just need to rise to the challenge.
