Innovators look to new UK oil regulator to support technology

Tue Feb 25, 2014 6:22am EST

* Wood Review highlights 6 areas for technology focus

* New regulator expected to work with oil start-ups

* Enhanced Oil Recovery key to getting final barrels out

By Stephen Eisenhammer

LONDON, Feb 25 (Reuters) - "Nodding donkeys" floating at sea, water injection, and "outside-in" subsea oil taps that can withstand the pressure found in the chamber of a firing gun are some of the technologies vying to keep the oil pumping in Britain's North Sea.

Britain's government is now planning to push companies to embrace new technologies to stem a decline in oil recovery which has seen production from the UK Continental Shelf fall 40 percent in past three years.

The Wood Review, Britain's first strategy assessment of its oil and gas potential in more than 20 years, was published on Monday, and the government immediately implemented its recommendation to create a new regulator.

The review also called for nurturing technology through industry work groups supervised by the regulator, and placing an increased responsibility on operators to develop, install and share results of using new technology.

The report stressed finding new ways of getting more oil out of reservoirs, reducing the cost of dismantling infrastructure like platforms and pipelines, improving exploration, making traditionally unviable small fields economical, and operating under high temperature, high pressure (HPHT) conditions.

Small firms which tend to lead this innovation complain often of the challenges of having their technologies accepted by the wider industry, so how Britain's new regulator will push innovation will be crucial.

MARGINAL FIELDS

One such company is UPB, which is trying to transform North Sea recovery with an unmanned oil producing buoy which works much like the onshore "nodding donkeys" typically seen in the Texan desert. It costs two thirds less than the closest alternative and can operate at a cost of $4 per barrel.

Its founder and chairman Richard Selwa says the oil majors can no longer be relied on for technological breakthroughs in mature basins where the potential prize is small.

"Marginal fields of between 2 and 20 million barrels is not an area where the super majors want to spend there money," Selwa told Reuters. "Ultimately the government can give the stimulus, the drive, the energy to make things happen... Your government really can help you," he added.

UPB received government grants at an early stage, which Selwa describes as absolutely critical to the firm's development.

The company signed a memorandum of understanding with FTSE 100 engineering firm Amec last year to install three unmanned buoys in the North Sea. It expects to have its buoys in the water by 2017.

Rival Enegi Oil is also using similar technology to develop fields in the North Sea and hopes to have a Field Development Plan, an important step in the development process, completed for its Fyne field in the next six months.

Another small innovator is Plexus, developing a subsea wellhead - a tap controlling flow from an oil well - which works from the "outside in", using hydraulics to squeeze the wellhead onto the supports for the pipe going into the ground.

Plexus says its system is safer, more reliable and cheaper over the long-term and will be suitable for increasingly common HPHT wells.

ABERDEEN VS STAVANGER

With high oil prices making it worthwhile to invest in squeezing more oil out of old fields, technology has helped keep the North Sea economical over the past decade. But while an estimated 12-24 billion barrels of oil could still be produced, new techniques are needed.

In recent years Norway's city of Stavanger has successfully cultivated an oil technology hub through a strong regulator, tax subsidies and a national oil company - Statoil - which invests in and trials new kit and methods.

Britain, where the North Sea has been managed with more of a laissez-faire policy and without a national oil company, has had less success in encouraging companies to invest in local research and development. Increasingly they have invested in technology to be used elsewhere, such as in Brazil or West Africa.

"The amount of R&D and the introduction of new technologies could have been greater. There hasn't been nearly as much R&D as there was in the '80s," Alex Kemp, professor of petroleum economics at the University of Aberdeen Business School, told Reuters.

"So far we have very little genuine enhanced oil recovery schemes, we only have some starting now," he added, referring to BP's decision to inject water to get more oil out of its Clair Ridge field.

The Wood Review stressed the importance of enhanced oil recovery (EOR), where water, gas, or chemicals are injected into the reservoir to force out more oil. The method can increase the amount of oil recovered from a reservoir to around 75 percent, from below 50 percent.

BP is using a form of EOR with low-saline water for its Clare Ridge project in the North Sea, the first large-scale use of the system in the area, and says it will enable an extra 40 million barrels to be extracted.

The Wood Review suggested the regulator could block plans, or even take licences away, if operators did not demonstrate they were using effective technology to maximise oil recovery.

For Malcolm Webb, head of industry group Oil and Gas UK, this is one of the most important roles of Britain's new regulator - pushing companies, often hesitant about using relatively unproven systems, to use new technologies.

"I think that's where the new regulator can play a major role... Making sure people are aware of the technology and encouraged to use that technology in their offshore development."

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