25-07-08 Small, independent oil and gas producers have begun to recognize the value in aging North Sea oil fields and could be key to unlocking an estimated 16 bn-25 bn barrels of oil equivalent lying unexploited in the UK Continental Shelf, industry analysts and participants say.
They say these small companies may now represent the future of the UK North Sea's hydrocarbon output as they snap up assets left behind by retreating oil majors and seek fresh discoveries in a bid to eke out the last of the region's dwindling resources -- a development previously hindered by high costs and lower oil prices.

"Smaller players are less burdened by an established cost base and have the flexibility to explore smaller, frontier fields," Managing Director and Head of Oil and Gas Sector at Lloyds TSB Corporate Markets Andrew Moorfield said.
"Larger players, however, continue to face the challenge of a long-term decline in production, which has so far been masked by the increase in oil prices, as there are fewerlarge fields producing bn-plus barrels in politically stable environments," he added.

Industry body Oil and Gas UK says that smaller firms are able to use their relative advantage to recover oil and gas from fields which wouldn't be economical for larger companies.
"With declining average discovery sizes, this trend is important for the future of the UK Continental Shelf," a spokeswoman for the organization, Sally Fraser, said.

A sudden interest in one of BP's 25-year-old North Sea assets -- currently undergoing decommissioning -- prompted the oil major to put it up for sale in June. When oil fields reach the end of their useful lives -- typically around 40 years for fields in the North Sea -- redundant oil and gas installations are decommissioned.
BP had already ceased production at its North West Hutton site in the North Sea after a combination of economic and technical factors led the company and its equity partners to determine that the field couldn't economically continue production beyond 2002, the company said. It started dismantling the facility five years ago.

"With a recovery rate of around 26 % of oil in place, we recognize other companies may potentially see value in trying to access the remaining oil," a BP spokesman, David Nicholas, said.
"It is the licenses we are selling, which are ongoing until 2013, as well as the easily accessible reservoirs which the companies may wish to develop," he said. The new owner will have to install infrastructure he added, with dismantling of the existing platform and pipelines set to continue.

Abu Dhabi National Energy Co., or Taqa, listed on the Abu Dhabi Securities Exchange, says that it believes the North Sea offers significant resource potential and plans significant investment over the coming years to extend the productive life and commercial viability of assets in the region.
Earlier this month, Taqa bought assets in six oil fields in the northern North Sea from Shell UK and Esso Exploration and Production.

A London-based trader in the North Sea cash crude market said maximizing output from older assets will prolong the life in the UK Continental Shelf, and suggested that smaller players should be encouraged to enter the market.
"Assets with a lower amount of oil available may have escaped the attention of larger operators," he said. "We must see an increase in the drilling of new wells in the UK North Sea, and the re-opening of some old wells too expensive to run a while back," an aspiration that may well be shared by Taqa, he said.