Financial Times: Record licensing round revives interest in hunt for North Sea oil: "This award allows us to extend our long history of exploring the UK continental shelf," said Robert Olsen, chairman of ExxonMobil International's UK arm. "While the area carries significant risk and high uncertainty, it also has a significant upside potential that ExxonMobil and Shell want to further evaluate and explore.": Wednesday 7 Sept 2005
By Thomas Catan
Published: September 7 2005
Twenty-four new companies have been given licences to explore for oil off the coast of Britain, part of a record licensing round announced yesterday.
The government and the oil industry hailed the result as evidence of a resurgence in interest in the North Sea, where output is declining after 35 years of production. But the large number of entrants - many of which are almost unknown - has fanned fears that the North Sea is at the centre of a speculative frenzy akin to the dotcom boom.
Malcolm Wicks, energy minister, said the round was one of the most successful ever and should lead to optimism about the UK oil industry.
"We are awarding the highest number of licences in UK North Sea history," he told the Offshore Europe oil conference in Aberdeen. "Twenty-four of the companies are new entrants to the North Sea. This is all very encouraging."
Companies had committed to drilling 17 wells, he said, more than any amount promised for a decade. A total of 152 licences were issued overall, the highest number so far.
The results of the latest round were welcomed by the UK Offshore Operators Association, the industry trade body.
"This is very welcome news for the UK offshore oil and gas industry and is a sign of the success of government and industry efforts to create an environment into which they want to invest," said Malcolm Webb, UKOOA chief executive.
But some analysts were taken aback by the large number of entrants to the North Sea and said that many could face problems finding the equipment and capital to develop the fields.
"I find it absolutely staggering," said Bruce Evers, an analyst at Investec Securities. "It's an extremely mature basin."
Many of the entrants are so small they do not have a website - so-called "mom-and-pop" companies often no more than a couple of people strong.
Under the new "Promote" licences issued by the government, companies no longer have to prove they are financially or technically capable of developing the field before receiving a licence. The process costs a fraction of the traditional licence in order to encourage a new breed of smaller, more entrepreneurial companies to develop North Sea fields.
Analysts said that manyof these companies would be forced to raise large amounts of capital in order to exploit the resources, fuelling a speculative surge on London's junior share market, the Alternative Investment Market. More than 20 oil and gas companies have listed on Aim this year, recalling for some the speculative internet bubble that formed at the end of the 1990s.
A company called Wham Energy, with assets in the North Sea, announced plans to float last week.
But it is not just the oil minnows that are interested in the North Sea. The so-called supermajors also bid for, and were awarded, rights to explore great swathes of the UK continental shelf - an area that includes the British parts of the North Sea.
ExxonMobil, the world's largest oil company by market value, was granted the rights to 1.2m acres in the North Sea, the largest single licence award in UK history.
The 20 contiguous blocks are in a relatively unexplored area called the Mid-North Sea High, about 90 miles to the east of Newcastle. Royal Dutch Shell owns a quarter of the joint venture.
"This award allows us to extend our long history of exploring the UK continental shelf," said Robert Olsen, chairman of ExxonMobil International's UK arm. "While the area carries significant risk and high uncertainty, it also has a significant upside potential that ExxonMobil and Shell want to further evaluate and explore."
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