Rystad: UKCS output never to return above 2 million boe per day

Even though Hurricane Energy had promising exploration results in UK’s fractured basins, energy intelligence firm Rystad Energy believes that the country’s hydrocarbon production would never rise above 2 million boepd again.

Rystad said on Thursday that hydrocarbon production on the United Kingdom’s continental shelf (UKCS) dropped steadily since its peak at 4.3 million barrels of oil equivalent per day (boepd) in 1999, never exceeding 2 million boepd after 2010.

Promising exploration results by Hurricane Energy in fractured basement reservoirs, previously untapped in the UK, were until earlier this year expected to revive the country’s output to 2.1 million boepd by 2035. But according to Rystad Energy, those hopes have been dashed.

“A recent jaw-dropping downgrade of Hurricane Energy’s Lancaster field revealed that the reservoir is more complex than previously thought. The result is a drastic resource downgrade for the company’s entire asset portfolio, as all its resources lie in fractured basement reservoirs.

“This is a major blow to the outlook for the UK’s future petroleum production, as fractured basement resources were estimated to account for nearly one-fifth of the future oil and gas output from the UKCS”, the intelligence company stated.

Namely, Hurricane’s unaudited estimate of recovery from the two existing Lancaster Early Production System wells has been reduced to 16.0 million barrels from 37.3 million barrels. Since 6.6 million have already been produced by the end of August 2020, remaining reserves at 1 September 2020 are estimated at 9.4 million barrels.

The estimate of 2C contingent resources at Lancaster has been reduced to 58 million barrels remaining from 486 million barrels in a report from 2017.

The downgrade has prompted Rystad Energy to revise its production forecast for the UKCS. Projections now show that production will never again exceed the threshold of 2 million boepd but will instead reach a maximum of 1.7 million boepd in 2035 before dwindling to nearly nothing by the middle of the century.

Rystad also said that UKCS production stood at 1.65 million boepd last year and is set to fall to 1.59 million boepd in 2020.

Olga Savenkova, upstream analyst at Rystad Energy, said: “The entire UKCS long-term production forecast has been impacted quite significantly. The main takeaway here is that we may never again see any significant production upsurge in UKCS production.

“A possible game-changer could now only be development of technical skills for producing from fractured basement reservoirs to increase the recovery factor“.

Rystad stated in its statement that basement plays on the UKCS were largely ignored in terms of evaluation and investment until Hurricane Energy emerged in 2004, founded on the belief that these complex reservoir systems were a significantly untapped resource in the North Sea.

Hurricane first embarked on an exploration campaign to prove the producibility of the Lancaster fractured basement and has since announced robust results of more than 2 billion barrels of oil equivalent (boe) in fractured basement reservoir resources believed to be discovered.

In turn, Lancaster became the UK’s first fractured basement field in 2015. The reservoir is penetrated by six wells, the first of which was drilled in 1974. This first well encountered oil in the basement reservoir, but as the basement was not the drilling target the potential was discounted at the time.

In 2009, Hurricane began an exploration campaign to prove the producibility of the Lancaster fractured basement. Since then, Hurricane drilled 11 wells and announced four fractured basement discoveries – Lancaster, Lincoln, Halifax, and Warwick West. Hurricane is so far the only company in the UK that has drilled into a fractured basement.

The Lancaster early production system was brought on stream in 2019. However, production data from the Lancaster didn’t confirm original expectations on reservoir properties. The reservoir pressure fell more rapidly than anticipated, which lead to a substantial resource downgrade across the fractured basement portfolio.

The downgrade slashed Hurricane’s estimated resources by nine-tenths and the total resource estimate for fractured basement resources dropped to 0.2 billion barrels of oil equivalent from the 2.3 billion boe reported in 2017.

The 2C resources for the basement alone at the Lincoln field were reduced to 45 million barrels. Resource revisions for Halifax have not yet been announced but based on the Lancaster revisions Rystad estimates these resources to be 88 million barrels – a game-changing reduction from the previous 1.235 billion barrels.

“To better understand the fracture network size and thus the reservoir size and oil volumes, an extended well test over a longer period is an option. A shorter-duration test can say something about the reservoir quality and the achievable production rate, but cannot determine the size of the reservoir”, Rystad explained.