UK Continental Shelf
Published: 13/05/2024
4-minute read
As part of our Energy Insights, Matthew Chapman, Origination Analyst takes a look at the UK Continental Shelf (UKCS). What it is, where it is, gas in the basin and explores its interesting history over the years. He'll also look at how this important part of our energy landscape has been utilised in the UK energy market, the current situation and what role the UKCS can potentially play in achieving net zero.
What is it and where is it
The UKCS is the area of regional waters outside of the UK territorial waters where the country has mineral rights. This includes part of the North Sea, the North Atlantic, the Irish Sea and the English Channel and is in an area defined by Order of His Majesty in Council under the Continental Shelf Act 1964 (Reuters 2023). Due to its large resources of oil and gas, the UKCS has developed offshore oil and gas fields over the last sixty years, historically making this a major contributor to UK energy supply.
Image: Keith Edkins Wikipedia
Did you know...UK Continental Shelf
Discovery and developments
First developments in the UKCS came back in 1965 when the West Sole gas field was discovered by BP in the Southern North Seas (SNS). Production then started in 1967 with gas delivered into Bacton, a gas terminal on the coast of North Norfolk. As discoveries continued and large reserves were found, it was clear that the SNS could likely supply natural gas for many years to come and meet UK demand. With an ever-growing indigenous energy resource discovered, the need grew to develop onshore infrastructure to improve the ability of the transportation of natural gas country wide. With the success of the gas in the SNS, exploration in the CNS (Central North Sea) and NNS (Northern North Sea) was then developed and discoveries in these areas of the UKCS were largely oil discoveries with associated gas rather than solely gas discoveries.
Developments of oil and gas in the North Sea initially took separate pathways with oil developments directed by market economics and short-term revenue maximisation, as there were no restrictions on oil exports. Gas discovery developments took a different path and were determined by reform of the onshore UK market. Until 1992 and the development of the Markham gas field, all domestic productions went to UK shores and production was constrained by the domestic market. Associated gas from oil fields was often injected to delay the sale of gas leading to sub optimal extraction of hydrocarbons throughout the lifecycle of a producing field.
Dash for gas
As the UK gas market went through liberalisation in the 1990s, British Gas's monopoly on purchasing, transmission and supply fell, with other parties gaining commercial access to infrastructure with producers able to market their own gas. In 1995 the market became oversupplied, due to the 'dash for gas', and spot prices fell below long-term contract prices, leading producers to look to export volumes to continental Europe. The opening of the Bacton-Zeebrugge interconnector in 1998 allowed production to expand quickly from 48 bcm (billion cubic meters) in 1990 to 115 bcm in 2000. Since the peak of 2000 production has continued to decline as exploration activity has fallen and fields depleted.
Net Zero targets
After many years of being a dominant basin for European oil and gas over the last decade, production has fallen consistently with exploration dropping and decommissioned fields not being replaced with new discoveries. This is in part due to the basin being mature and potential reserves dropping but also oil and gas in other regions becoming more economical and thus more attractive for investment. As a result, the UK and other countries in Europe now look at alternative sources of gas such as Norwegian supply and LNG (liquified natural gas). In power, they have looked at investment in new, more environmentally friendly technologies like wind and solar. Despite UKCS gas having a comparatively reducing role in the UK energy gas mix, it's still an important asset to the country's energy security and net zero targets. The North Sea Transition Authority (who are helping drive the North Sea energy transition) anticipate that the UKCS will make a major contribution to a greener future, with the potential to achieve a possible 30% towards net zero targets. They estimate that the CO2 storage capacity at the UKCS is at 78 Gt, sustaining the UKs CCUS requirements for years to come. With carbon capture, utilisation and storage (CCUS), green and blue hydrogen and renewables, plus the utilisation and repurposing of existing infrastructure the UKCS is positioned as a vitally important energy source of the future.
Price volatility
In the UKCS like other basis there is both planned and unplanned outages that aim to enhance safety, prevent injury or spills, and reduce operational costs. Both planned and unplanned maintenance or outages usually have different effects on price. When planned maintenance schedules are published, traders are able to price this into contracts ahead of time, for those contracts that are affected by those outages. For unplanned outages, they are observed as a shock to the supply of the market, often creating uncertainty, which in itself can increase market volatility depending on how long the outage is expected to take and the affected volume. As well as potential unplanned outages due to technical problems, other issues can influence markets, such as strikes from offshore workers, although across the UKCS assets these are typically for short periods.
The UK has produced on average 95.6 mcm/d since the beginning of 2020. Excluding 2021 which was rife with maintenance after the return of contract workers after Covid where maintenance was delayed due to restrictions on the number of workers on platforms, production averaged nearly 100 mcm/d. Over the last five years some major gas fields that deliver a large proportion of indigenous gas supply are Franklin, Cygnus, Tolmount and Culzean. Many other gas fields in the UK produce significantly smaller proportions yet are still important to the UK gas supply.
Final thoughts...
The UKCS is and has been an important part of both the UK and European energy systems. While its contribution to the energy mix has dropped over the last decade or so, there are still opportunities in the UKCS, specifically in relation to net zero and new technologies such as offshore wind...which we'll explore in an insight piece in the coming months.
Keep an eye on our BLOG pages for further insight pieces!