Oil rigs in the Northern North Sea could start to close unless a solution to a shortage of fuel gas is found

Lack of fuel gas threatens mass North Sea rig closures

Britain’s North Sea oil industry is nearing a “production efficiency” precipice as dwindling supplies of fuel gas threaten mass rig closures.

Lifting oil from nearly depleted mature reservoirs requires the injection of vast quantities of water – a power intensive process that requires a reliable source of energy, known as fuel gas.

Some platforms in the Northern North Sea (NNS), a very mature part of the basin, are now unable to generate enough of their own fuel and are having to revert to importing the shortfall from neighbours, but the overall net position in a key part of the NNS will go negative as early as 2016.

This could force the early abandonment of rigs, with the loss of critical platform hubs sounding the death knell for dependent fields.

"We may be near a production efficiency precipice," said Calum McGregor, economics and joint venture manager at Taqa Bratani, speaking at Oil & Gas UK's Aberdeen conference earlier this summer. "Because of the interconnected nature of this area, there is a domino effect that kicks in."

McGregor presented findings from a cross-operator work group he co-chairs which seeks to improve co-operation amongst producers focused on the NNS "Rejuvenation Area", which includes Taqa's Cormorant and BP's Magnus hubs – these two will leave the most stranded assets if they shut down early.

To arrest the decline, producers need to lay their hands on fresh power supplies and possible solutions include installing a power ring main, rationalising power generation equipment, bringing fuel gas in by tanker, sacrificial decommissioning and new pipelines.

Under government auspices, a Gas Work Group is looking at ways to source, transport and deliver reliable fuel gas. It is due to report back by the end of October.

"We've got to get this fixed – a very small amount of gas could make a lot of difference to this area," McGregor said. "If you can improve water injection then it delivers a significant incremental uptick in barrels."

Ian Sharp, chief operating officer at Fairfield Energy, described a downward "death spiral" at the Aberdeen conference ,where less power leads to lower water injection, so production falls and there is less fuel gas for water injection. Eventually the platform becomes uneconomic and has to cease production.

He added that the Rejuvenation group was now turning to the specifics of creating an effective fuel gas market. "But there's not a lot of time to ensure we have safety in fuel gas supply before we see a downward spiral."

Small producers trying to access gas find it particularly difficult, according to Sharp, because there is not much upside for the seller, meaning they often offer to make "reasonable endeavours" to supply another platform with no penalties if they fail to deliver.

"An individual platform doesn't need large volumes of gas for fuel, especially when you can couple it with your own production, so that means you are immaterial to the operator," he said.

"You can't always rely on the gas and power supply, even if you persuade people to sell it to you," one engineer said, speaking on condition of anonymity. "Reasonable endeavours means it could be turned off when they like and even an hour's outage every three weeks can hinder your production."

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