The rumours of the death of North Sea oil have been greatly exaggerated

Those industry analysts who have predicted a rapid, irreversible decline in North Sea oil and gas activity might have to reassess their position in light of the 27th UK Licensing Round. The Department of Energy and Climate Change placed a record 167 new licences up for grabs. Specialist operators such as Trap Oil (TRAP) and Ithaca Energy (IAE) were always likely to extend their offshore interests, but renewed interest from industry heavyweights such as Royal Dutch Shell (RDSB) and ExxonMobil suggest that the region’s full potential is far from exhausted – or perhaps not even fully appreciated.

Anglo-Dutch Shell unveiled another major investment in the UK North Sea through a $525m (£325m) agreement to buy Hess Corporation’s interests in the 12 Beryl area fields, located north-east of Aberdeen. The expected productive lifetime of the Beryl fields is now appreciably longer than originally anticipated – perhaps by 20 years or more. The deal follows on from an announcement by Shell and ExxonMobil that they are moving ahead with plans to develop the offshore Fram oil and gas field, located 140 miles east of Aberdeen, after successfully obtaining the necessary permissions from Whitehall.

In common with the Beryl fields and many other North Sea assets, the economic viability of Fram has been transformed due to technological advances in areas such as subsea drilling and 3D reservoir modelling, together with long-term expectations for the price of Brent Crude. The partners in the Fram field hope to achieve peak daily production of 35,000 barrels of oil equivalent (boe) within the next three years, with an expected lifetime of 20-30 years. The developments at the Beryl and Fram fields mirror last month’s announcement by BP (BP.) that it had extended the life of its Andrew platform in the North Sea by around a decade or so. As part of its overall £10bn investment plan in the region, the completion of a new processing unit on the platform will allow BP to tap into the offshore Kinnoull reservoir, estimated to contain 45m boe.

Norway’s state-controlled energy giant, Statoil ASA, joined the other majors in expanding its presence in the UK North Sea through the award of seven exploration licences, including three blocks in the highly rated Catcher area on the Western Platform, while Canada’s Talisman Energy confirmed that it was moving ahead with a £1.6bn project to redevelop its Montrose field. Though UK oil and gas production has certainly been in decline, the rumours of the death of North Sea oil have been greatly exaggerated.