In the run up to the referendum there were wild stories and reports in circulation about vast untapped and undiscovered oil reserves lurking in the depths of Scotland’s seas.
If only the oil industry could be bothered getting out there to discover it.
Stories abounded of oil in the inshore waters of the Clyde coast, vast new undeclared reserves on the Clair Ridge and shale oil oozing out of the Kimmeridge Clay formation.
The most extreme estimates were 42billion barrels oil equivalent (boe) of remaining oil and gas reserves, roughly equal to what has already been produced. So where does the truth lie in all this?
Rarely mentioned during the debate were the official government (DECC) proved and probable reserves estimates for oil and gas at around 8billion boe, a figure not too different to estimates from Oil and Gas UK.
This is a far cry from the 42billion barrels of hope. The stark reality of the North Sea is that production continues to decline, infrastructure is old, costs are escalating, the oil price weakening and decommissioning is hurtling towards the industry at a frightening rate.
Recession looms and the industry needs a new game plan and it needs help if it is to survive and prosper.
There are some bright spots. BP and partners are doing a great job coaxing the Clair field to give up ever larger quantities of her heavy oil from a complex reservoir believed to hold up to 7billion barrels – resources not reserves.
The reserves are that part which can be economically recovered. The Phase 2 development is nearing completion and targets 640million barrels. And Clair Phase 3, that would extend production beyond 2050, is at the planning stage.
BP and partners will also deploy the first large-scale use of low salinity water injection designed to increase the amount of oil recovered.
Also on the horizon are the heavy oil projects of the North Sea where the Mariner, Bentley and Kraken field developments are pressing ahead, with Bressay marking time for now.
These fields combined with others will see UK oil production rising for the first time in 15 years; perhaps for three to five years, but then declines will return and production will carry on down, perhaps to a level similar to today by 2020.
But there are black spots and unfortunately these have been created by the Department of Energy and Climate Change itself.
The UK Government has for a decade or more wanted to lead the world in carbon capture and storage (CCS). These plans have progressed at a snail’s pace for the simple reason they are unworkable.
CO2 captured at a power station in the right hands can be turned into a valuable resource because injected into a mature oil field it can enhance oil recovery (EOR) by over 10%.
That approach could sustain a host of proper jobs and extend the life of many fields. Backed by government
this could make a real difference to the future of the North Sea.
But instead DECC has pursued CCS unlinked to EOR – it’s bad for the environment you know.
The project to inject CO2 from Peterhead power station into the Goldeneye field will bring zero benefits to Scottish society – with the exception perhaps of a few jobs that are not underpinned by a viable business plan.
What it will bring is higher electricity bills and reduced energy security – would that encourage Scots to vote Yes or No should there be another referendum?
David Cameron really needs to bring some sanity to energy policies.
Where the UK wanted to lead, the US, not known for its atmospheric concerns, is pressing on with a number of CCS projects all linked to EOR.
Use CO2 to produce more oil and you make money and create proper jobs. Simply capturing the CO2 to then throw it away creates nothing.
The UK could have been a world leader had the UK government given BP some support for its Peterhead and Miller Field CCS-EOR project eight years ago. The prize was 40million extra barrels of oil.
Miller could have served as a flagship where others might follow and we may already have had a booming CCS-EOR industry and enhanced energy security to boot.
The industry has been in the doldrums awaiting the uncertainty of the referendum to pass. As a friend put it, “the industry needs a new game plan” and in the UK the Wood Review is the main show in town.
We need to assume that Sir Ian has found the best solution and the government should now press on with some urgency to implement Wood’s recommendations.
One of those was to promote EOR.
Is it too much to ask for some dots to be joined – Wood – CCS-EOR – decommissioning delayed – more oil – more energy security – more money – more jobs – more prosperity.
And I’m sure the industry would welcome the Treasury to examine how the fiscal regime might also be adapted to help maximise oil and gas recovery in tandem with implementing Wood’s recommendations.
Westminster must never forget that 45% of Scots voted Yes and for many of those, disaffection with the “numpties” of Westminster, was the cause.