E&P challenges in west of Shetland oil fields

Exploration and production West of Shetland has received huge amounts of criticism from environmental groups, the BBC reported: ‘Deepwater drilling in the area west of Shetland has attracted strong criticism. Environmentalists have claimed that the Deepwater Horizon disaster in the Gulf of Mexico showed the dangers inherent in exploring such areas.’ Full article can be seen here

Such criticism is perhaps a reflection of the inherent challenges associated with exploration and production in the west of Shetland region. The region is seen as being ‘extreme’ when compared to the rest of the North Sea with deeper water and a harsher environment. However, this hasn’t stopped companies investing in the area – BP are currently developing the Clair field and have invested billions in the region.

Environment and Technology

Deeper water and extreme weather conditions significantly increase the amount of risk associated with offshore operations and this is no different for operations west of Shetland, many operations here are high risk – high reward. This extreme environment means operators face greater technical challenges than anywhere else offshore UK.

Infrastructure

Due to the lack of infrastructure in region only infrastructure owners and major players are truly able to bring their reserves to production, this is perhaps most evident in BP’s phased development of the Clair field. BP have invested billions in this development and Trevor Garlick, Regional President for BP’s North Sea business said: “The Clair field is an established, high quality asset with a strong future and with our co-venturers we are taking significant steps to maximise its potential.” More on this can be seen here

The lack of infrastructure hinders the development of reserves held my small and mid cap companies, without access to infrastructure they are unable to commercialise their reserves.

Investment

A trend that is currently affecting small and mid cap companies across the whole of the UKCS and west of Shetland is access to capital. Tight capital markets and uncertain economic conditions are making it difficult for companies to secure investment, therefore hindering the development of their operations.

Do you agree with these challenges? Would you include anymore?

You might also be interested in how OMV managed their operations west of Shetland, download a presentation here

To find out more about this and more please see the Oil & Gas Outlook North Sea conference at: www.terrapinn.com/northsea