West of Shetland area key zone for new oil – report

The key role an area west of Shetland plays in Britain’s oil and gas sector has been highlighted in a new report from energy consultant Hannon Westwood.

Hannon Westwood says the area accounted for 50% of new UK reserves last year.

Some 942million barrels of oil equivalent (boe) in exploration and appraisal additions came from west of Shetland out of a total 1.9billion boe for the entire UK continental shelf (UKCS), according to the report.

Hannon Westwood says 70 exploration and appraisal wells were drilled in the UKCS last year – 27% more than in 2006 – reflecting activity levels not seen since 1997. In its the report, the consultant says Oilexco and Venture Production were the most active players, participating in 17 of the wells.

BG Group and BP were also among the busiest firms, drilling five wells each.

New entrants to the UKCS since 2003 participated in 67% of the wells drilled, a figure that is expected to increase over time, according to Hannon Westwood.

The success rate of drilling projects jumped to 63% from a long term average of 25%-33%, says the report, adding that an industry-wide trend towards appraisal drilling and away from exploration continued last year.

Four times more reserves were progressed through appraisal drilling than were discovered by exploration drilling, according to Hannon Westwood, adding that just 353million boe of the 1.9billion total was discovered through exploration drilling.

Chris Bulley, a partner at the Scottish firm, said: “2007 was a year that consolidated an upwards trend in appraisal drilling. The influence of the west of Shetland area was also significant, with about 50% of found and progressed reserves coming from there and still the potential for future large finds.”

Mr Bulley added that although the west of Shetland remained largely the domain of the oil majors, there were still a raft of opportunities in the more traditional parts of the North Sea.

“With the results of the 25th (UKCS) licensing round due later in 2008, the participation of new entrant companies is likely to increase and spill over into future drilling,” he said.

Crude oil futures prices fell yesterday as traders booked profits after last week’s record surge above $139 a barrel and as the dollar bounced against the euro.

Oil soared more than $16 a barrel on Thursday and Friday on a weaker dollar, tension between Israel and Iran, and a forecast from Morgan Stanley that prices could reach $150 by July 4.

July crude in New York slipped down $4.19 yesterday to $134.35 a barrel, while July Brent in London was down $3.78 at $133.91.