UK enjoys frontier output boost

Advances in technology and innovative development concepts are making west of Shetlands projects more commercially viable

Oil and natural gas fields to the west of the UK's Shetland islands will make a growing contribution to the country's upstream production in the next few years. This is the result of billions of dollars of investment committed to the north Atlantic frontier area before the oil price downturn took hold in 2014.

BP has almost finished a £3bn ($3.7bn) project to redevelop the Schiehallion and Loyal oil fields, with output from a new 130,000 b/d floating production, storage and offloading (FPSO) vessel scheduled to start in the second quarter. Total aims to complete a £1bn project to tie back the Edradour and Glenlivet fields to its £3.5bn, 90,000 b/d of oil equivalent Laggan-Tormore gas complex later this year. And the BP-led £4.5bn, 120,000 b/d Clair Ridge oil development is due on stream in 2018.

West of Shetlands projects are more technically challenging than those in the North Sea, because of extreme weather and sea conditions, complex geology and a lack of infrastructure. But advances in technology and innovative development concepts have helped make them commercially viable. BP plans to deploy cutting-edge enhanced oil recovery techniques at Schiehallion, Loyal and Clair Ridge. And Laggan-Tormore is the first development in the UK that pipes production to shore with no offshore surface infrastructure.

But the next wave of west of Shetlands projects faces tougher investment thresholds, because of lower oil prices. Chevron has returned its long-delayed 100,000 b/d Rosebank development to the drawing board to try to strengthen its economics. This includes changing the design of the platform. "We have moved the hull from being one of the largest turrets ever built, to now comfortably within what is established in the industry," upstream executive vice-president Jay Johnson says. "Our goal is to de-risk."

Chevron adopted a similar approach for the BP-operated 140,000 b/d Mad Dog 2 development in the US Gulf of Mexico, with a platform redesign helping to reduce the cost of the project to $9bn from an original estimate of $22bn. The US firm made a final investment decision on Mad Dog 2 earlier this year, but plays down the prospect of a decision on Rosebank in the short term. "Rosebank has attractive economics," Johnson says. But "we have far more economic projects today than we are willing to spend money on."

Going down a storm

The next west of Shetlands field to be developed will probably be Lancaster, which UK independent Hurricane Energy discovered in 2009. The company plans to lease an FPSO for a 17,000 b/d initial development phase. It is targeting a final investment decision on the project by the end of June. An independent assessment will quantify Lancaster's resources before this, with recent drilling results suggesting that previous guidance of 300mn bl is conservative, the firm says.

Hurricane specialises in fractured basement reservoirs, where oil accumulates in cracks between rock, as opposed to inside it. This niche focus has yielded impressive results. The company followed up Lancaster with an oil find at the nearby Lincoln prospect last year. And it has high hopes for the Halifax prospect, which it began drilling in January. Hurricane has yet to give a resource estimate for Lincoln, but is confident that it holds more recoverable oil than its pre-drill estimate of 250mn bl. Other exploration activity in the area this year includes plans by BP and China's Nexen to drill the Craster prospect.

The west of Shetlands region was largely excluded from a recent frontier licensing round, with UK regulators opting to concentrate on underexplored areas of the North Sea and the Rockall basin off the west coast of Scotland.