The NSTA could award licenses for these priority blocks during the spring, it announced on Tuesday. The authority had previously said it sought to license the priority clusters ahead of the other blocks and that it expected to award the first licenses from the second quarter of 2023. All this indicates licenses for the priority blocks could be awarded as early as April.
To encourage production at the new blocks as quickly as possible, the NSTA identified four priority clusters in the Southern North Sea that have known gas and oil reserves and are close to existing infrastructure, and as such have the potential to be developed more quickly than other blocks.
“If a small discovery of dry natural gas is found close to an existing platform with a connection to a gas pipeline to shore that has spare capacity available, then an exploration well can be converted into a producing well using a sub-sea production frame and tying this by pipeline to the nearby platform. On paper, this can be done in some 18 months,” according to Morten Frisch, senior partner at Anglo-Norwegian energy consultancy Morten Frisch Consulting.
However, Frisch warned, the reality is today that due to a very high level of oil and gas exploration and production activities in Norway, the service industry might not be able to deliver all the components needed for such a satellite development in just 18 months.
Norway has been actively trying to boost its production for several months by connecting new offshore fields located near existing fields to meet the increasing demand from its main export market - Europe.
There are several necessary consents after licensing and before production to ensure the development of the new blocks are in line with net zero, the NSTA also said, which indicates that production in the priority areas might not start before the winter of 2024-2025 at the earliest - if the licenses were to be awarded as early as April for instance - and possibly sometime in 2025, depending on the duration of the administrative procedures.
For Michael Grossmann, managing partner at Paris-based Tumbleweed energy consultancy, 18 months is not realistic. “The region is well explored and has existing pipeline infrastructure, but we are in an investment cycle where resources are rare and there are incompressible delays for environmental impact and risk studies. This seems more like political signalling,” Grossmann said.
The NSTA will now carefully study the bids submitted as part of this round, with a view to awarding licenses quickly and supporting licensees to start production as soon as appropriate, the authority said on Tuesday.
The non-priority blocks might start producing about five years after discoveries are made, if exploration leads to discoveries, based on the NSTA’s analysis of the average time between recent discoveries and first production. However, for small dry gas discoveries near existing infrastructure, this could be done in a shorter time, based on Frisch’s analysis.
A total of 76 companies submitted bids for the 258 blocks and part-blocks put on offer as part of this round of exploration licenses. The NSTA is also encouraging operators to look at reopening closed wells.
If discoveries at the new blocks allowed the UK to maintain or increase its domestic production in the coming years, this could potentially limit the country's reliance on LNG imports which reached an all-time high of 19 mt last year, according to Kpler data.
At the moment, several factors indicate the UK's reliance on LNG looks to stay strong in the coming years. First, the EU faces an unprecedented gas shortage and thus is unlikely to export as much pipeline gas to the UK as it used to prior to the current energy crisis. In fact, last year, higher EU prices coupled with the UK's abundant access to LNG supplies incentivised net UK piped exports to the continent rather than the opposite.
Second, when EU prices are higher than UK prices, it also incentivises Norway to optimise piped exports to the continent rather than to the UK.
Third, EU solidarity rules for sharing gas supplies among member states no longer apply to the UK as it left the EU. This means the UK cannot rely on piped supplies from the bloc if both neighbours face a supply emergency and need to ration their supplies. Great Britain's National Grid warned that such scenarios could lead to blackouts in Great Britain.
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