The arrival of Apache Corp. in the U.K. sector of the North Sea this year could mark a watershed event in the evolution of the North Sea. Apache is acquiring BP's Forties Field, a property that has been a significant component of BP's North Sea portfolio since its discovery in 1970. Apache is the largest North American independent to move into the North Sea in recent years. Although it is mature, the U.K. North Sea is still a world-class petroleum province-in 2002, production averaged 4.2 million barrels of oil equivalent (BOE) per day, making it the fourth-largest gas producer and the tenth-largest oil producer in the world. In 2002, there were 260 oil and gas fields either onstream or under development in the U.K., with a further 84 new fields planned for the future. To date, the U.K. has produced 32 billion BOE, with a further 20 billion yet to be produced from existing fields and expected developments. Estimates of undiscovered reserves range between 4- and 25 billion BOE. Beginning in 2000, the U.K. Department of Trade and Industry (DTI) has been actively working to attract new-entrant companies onto the U.K. Continental Shelf (UKCS). A small marketing team has been striving to broaden the group of companies engaged in exploration and development activity there. The North Sea offers a variety of investment opportunities, from wildcat exploration to redevelopment of fields that have ceased production. One such example is Argyll Field in the Central Graben, which is being redeveloped as Ardmore Field. From small start-ups to large independents, companies that fill any strategic niche in that continuum are welcome. Clearly, the business environment in the UKCS is evolving. Major oil companies are decreasing their activities, and a number of smaller independent oil and gas companies from areas such as the Gulf of Mexico are moving into the region. In 1999, a joint government and industry task force published a vision for 2010 that defined six targets against which progress could be measured. One of the key targets is 3 million BOE of production per day. Today, it appears that current fields and projected new developments will only supply 2.5 million BOE per day in 2010. The shortfall is the "exploration wedge" that must be filled by exploration success in the coming years. There is a need to attract more new entrants to ensure that the remaining reserves in the basin are both explored and developed. And, companies with legacy holdings need to continue to invest in their core areas. Stratigraphic traps The U.K. sector is often described as being a mature hydrocarbon province-the first commercial gas discovery in the U.K. North Sea was the BP-operated West Sole Field in 1965. However, there are still opportunities for wildcat exploration in both frontier areas such as the Atlantic Margin and in underexplored plays in the more mature North Sea basins. EnCana Corp.'s giant Buzzard discovery in 2001, which has an in-place resource estimate of 1.1 billion barrels of oil, is the largest discovery in the U.K. North Sea since Nelson Field in 1988. Buzzard is a stratigraphic trap in the Upper Jurassic syn-rift sequence, and it has spurred a new era of active exploration for stratigraphic traps. Indeed, stratigraphic traps may prove the most promising exploration opportunity on the UKCS. A large percentage of the discovered hydrocarbons in fields found to date are in structural traps; just 12% are found in combination structural/stratigraphic traps and only 5% in stratigraphic traps. Of the forecast 4- to 25 billion BOE in UKCS undiscovered reserves, it is estimated that potentially 50% to 75% are within stratigraphic traps. The main targets are within Upper Jurassic syn-rift and Cretaceous to Paleogene post-rift plays. Deepwater sandstones with limited lateral distribution constitute the principal reservoir in these plays. Successful exploration for stratigraphic targets will rely on well-grounded conceptual models for reservoir distribution and the well-constrained use of seismic techniques (such as AVO analysis and long-offset seismic) to map trap geometry and pinpoint drilling locations. Satellite fields Considerable potential also exists for "near field prospects" or satellites and the development of undeveloped discoveries. There are more than 250 undeveloped discoveries on the UKCS that represent a significant resource. Approximately 150 of these are within 10 kilometers of existing infrastructure and few are more than 50 kilometers away. Last year Challenger Minerals Inc. and Palace Exploration farmed into the DNO-operated West Heather discovery in the East Shetland Basin. In 1977, the original discovery well was deemed noncommercial. That changed in late 2002, when two appraisal wells were drilled that proved the accumulation could be commercially developed. The 2/5-19y well perforated a 150-foot section of Brent reservoir at 9,000 feet and flowed 38-degree API oil at a rate of 6,000 barrels per day. The discovery, Broom Field, is expected to be tied back into nearby infrastructure in the near future. Another example of "niche" development opportunities is in the exploitation of heavy oil discoveries. There are five medium- to heavy-oil fields on production on the UKCS, and a further 2- to 4 billion barrels in place that are discovered and awaiting development. Available acreage The DTI, which administers both onshore and offshore licenses, has made some changes to its discretionary award process to tempt new firms to work in the UKCS. The 21st Round, which is currently open, features a new "promote" license in addition to the traditional license. Previously, applicants applied for blocks by offering a work program that included such significant activity as an exploration well or new seismic acquisition. These traditional licenses remain available. For the first time, however, the DTI is offering a promote license. Under this type of contract, applicants can offer a work program based on technical evaluation alone. Companies granted a promote license will have an initial two-year period to work up their ideas and market them to third parties. The licensees in place at the end of the two-year term will then commit to a substantial work program based on the initial work undertaken by the promote licensees. Promote licenses will then revert to the time schedule of a traditional license after the first two years. To further encourage smaller companies, promote licenses will have reduced fees for the initial two-year period. Another DTI initiative concerns fallow acreage. Many fallow blocks and discoveries are within licenses that have been held by the original licensees for more than 30 years, and the government would like to ensure fallow blocks are recycled to those licensees willing to invest in them. The Fallow Acreage Initiative is designed to stimulate exploratory drilling and the development of undeveloped discoveries. It will work as a mechanism to release some of the potentially best acreage and opportunities left on the UKCS. Details of the initiative and the blocks available on the Fallow Register can be found on the UKLIFT web site at www.uklift.co.uk. The DTI plans to release opportunities on the Fallow Acreage Register at three monthly intervals. The second phase of 40 blocks and 37 undeveloped discoveries was released in early March. M Jim Munns is a senior geoscientist for the U.K. Department of Trade and Industry, Oil & Gas Directorate, and manages the "Promote UKCS" initiative. He was previously with Amoco UK in technical and managerial positions in the North Sea and West Africa.

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