A collective view of the U.K. North Sea continental shelf shows some 34 billion barrels of oil equivalent have been produced during the past 40 years, while a potential 25 billion barrels remain, according to Jim Hannon, founding partner of Hannon Westwood LLP, a Glasgow, Scotland-based oil and gas consultancy.

To find and produce from those resources will take at least 50 exploration and appraisal wells per year for the next 10 years.

"Overall, well results have been good so far," Hannon says, but future production could be constrained by finances and resources, including rigs. At any one time, there are only 11 to 12 rigs normally available for exploration and well appraisal work.

"There has been a net flow of 124 new companies and start-ups into this area since January 2003, which puts more pressure on finances and resources," he says.

The U.K. asset production market is not adequate to meet the demands of the new group due to insufficient cash flow from oil or gas production, so mergers or financial failures seem inevitable. Hannon predicts some 90 companies are likely to disappear, based on current performance and acreage spread. Conversely, 30 companies appear to Hannon to have "all the ingredients for success, be it people, acreage, or financial backing."

There are still many available assets in the North Sea to be considered, says Hannon. In total, about 800 properties currently under license should be reviewed by their owners during the next four years, and will either be relinquished or will require investment in 3-D or wells to evaluate the retained areas under license.

The annual value in the U.K. continental shelf acreage markets is between $2- and $6 billion, and this year asset sales are overtaking corporate sales.

Dwindling reserves on mature assets in the area are driving operational expenses higher and are counterbalancing the recent high price of oil. This may cause some of the major players to sell.

Some 7 billion barrels of fallow oil and gas discoveries are currently under-appraised in the North Sea, and around 3 billion barrels of this resource is likely now to become commercial, he says. Also, farm-in wells will require new funds of about $400 million per year, over the next four years.

New players' wells have an average find of 18 million barrels of oil equivalent, according to the firm's data. On the other hand, majors that have North Sea experience have an average find of 54 million barrels equivalent.

This appears to be driven by the difference between the shallower North Sea Jurassic and Tertiary wells that new players generally go into, and the deepwater or deep condensate wells dominated by majors. The cost of drilling the deeper wells is about $50 million or higher.

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