As Minister of State for Energy, Malcolm Wicks is primarily responsible for secure, sustainable and affordable energy for the UK. Mr. Wicks was first elected to Parliament in 1992, and from 2003 was the Minister of State for Pensions. Since becoming Minister of State for Energy last May, Mr. Wicks has been very busy with what could be called the beginning of a new era in the North Sea oil and gas industry, especially in regard to British-Norwegian co-operation. We were fortunate indeed to have the opportunity to ask Mr. Wicks a few questions.

You’ve only been in office for a short time, what would you say have been your peak moments in the office?
“Since taking up office, I have already been offshore – visiting Total’s Elgin/Franklin field – and I have met a wide range of contacts in the industry. The tour of the offshore facilities has definitely been one of the highlights so far – it illustrated the sheer scale and scope of activities which the industry is involved in, and the high importance industry places on safety and operational procedures. In particular, I have been extremely impressed by the passion and professionalism across the industry, and the way in which technological and operational challenges continue to be met. And I am very pleased to have the Energy portfolio which I believe is one of the most interesting and challenging within Government.”

How would you characterise your goals for the office? What would you say is the philosophy behind those goals?
“My Department has an overall goal to create prosperity for all. Within the energy portfolio, I want Government to do everything it can in setting the right framework and conditions to ensure that the UK has long term secure, sustainable and affordable energy supplies. This means promoting a diverse range of fuel types, sources and trading routes, which includes fossil fuels and renewables, and finding ways to reduce harmful atmospheric emissions at the same time. UK oil and gas production plays a vital role in providing the nation’s energy needs, and Government is working closely with industry to ensure that this continues and that we maximise economic recovery of hydrocarbons from the North Sea.”

The Whole of the UK North Sea
The 23rd round once again opens up the entire UK Continental Shelf. Could you say a bit about the strategy behind this focus?
“We have a clear idea of what we want – and that is to see as much licensed UK acreage made available for exploration and development as possible. The 23rd Round made the whole of the UK North Sea available and areas West of Shetlands. Of course once further Strategic Environmental Assessments have been carried out, we hope to offer up remaining areas of the UKCS, including in the next – 24th – Round, UK territory in the Irish Sea.

“But we need to seize the moment. As a maturing province, the UKCS has already produced vast amounts of hydrocarbons. Although we are now over half way through the total UK reserves, there are still substantial quantities to be produced. I am determined to ensure that industry is able to carry out the exploration work and make the investments needed now so that existing infrastructure is fully utilised in bringing in production from smaller oil and gas accumulations which might prove uneconomic once infrastructure has been removed.”

Does this strategy indicate that innovation and improvements in technology have now caught up to the demands of fields once considered marginal or end-of-life?
“There are a range of reasons why some developments are now possible, but would not have been economically feasible some years ago. Technology has played a part in this, but we have also seen moves by the industry to enhance the commercial environment, speeding up North Sea deals, and improving third party access to infrastructure, and work in partnership with Government to find ways to maximise development opportunities. The new influx of North Sea players, such as Paladin, Apache and Perenco, over recent years has also made an impact on how fields are viewed and produced.

I have been extremely impressed by the passion and professionalism across the industry, and the way in which technological and operational challenges continue to be met.

“My Department has very recently launched a brownfields ‘stewardship’ initiative. This is directly linked to enhancing production from existing ‘brown’ fields through to stewardship discipline. If we can extend the life of these fields, there is the potential for a larger window for nearby satellite developments to utilise the field facilities and linked infrastructure.”

Are you currently satisfied with the levels of exploration? Just how important is increased exploration for the development of resources on the UKCS?
“Signs are promising – but we could always do with more quality exploration. Activity in 2004 showed an upturn, particularly in appraisal drilling, where there was an increase of over 50% compared with 2003. Although the oil price may have been partly responsible for this, both our ‘Fallow Initiative’ and our new approach to licencing have played a large part in getting wells drilled. “The upturn appears to be continuing, with figures to the end of the second quarter of 2005 indicating half a dozen more exploration and appraisal wells than for the same period last year. However, we cannot be complacent, and I will be looking to ensure that we continue to have the right conditions to ensure every promising prospect is drilled and discovery appraised.”

Could you comment on the “use it or lose it” philosophy concerning awarded acreage – will requirements for development be more stringent?
“Government and industry have been very active on the fallow initiative. As I’ve already said, there is an increasing need to utilise existing infrastructure – vital to ensuring that all promising prospects are drilled. It follows that that those holding acreage should also be actively pursuing opportunities.

“The fallow initiative is all about getting acreage into hands of those best placed to exploit it. We are working very hard and seeing success. Over 560 blocks and over 230 discoveries have been identified as fallow. This has already led to activity on 135 fallow blocks and 41 discoveries, with 45 wells drilled and 12 development plans coming forward.

“In addition 111 blocks have been relinquished, of which we have already re-licensed 16 in recent rounds. We intend to make all relinquished blocks available for future rounds – in fact we included 50 in the latest, 23rd Round. I intend to keep up the momentum.”

Has this new round generated interest in newer companies and companies that have not previously shown an interest?
“On licensing, the signs are extremely encouraging – we have just seen a record number of block bids in our latest, 23rd, Offshore Round with applications for a total of 279 blocks – the most for 30 years. The applications are from a range of companies including some firms which, if successful, would be new to the North Sea. “The last two Rounds prior to this, which introduced the ‘promote’ licence a tenth of the cost of the traditional licence, and the ‘frontier’ licence, aimed to promote increased exploration and appraisal activity West of the Shetland Islands, were also very successful.

Signs are promising – but we could always do with more quality exploration.

“These licensing innovations have provided opportunities for a wider range of companies to invest here and we have attracted record numbers of new entrants – issuing 58 new ‘promote’ licences last year, with 15 companies new entrants to North Sea. Last year we awarded a total of 97 licences, the highest number for 10 years. These covered 163 blocks, including 41 West of Shetland, with 26 blocks via new frontier licence.

“So signals are very good for the 23rd Round and I look forward to making awards later in the year. But of course awarding acreage is only the start of a process in which I am determined to make sure that prospects are appraised and taken forward and, crucially, that wells are drilled. And our licensing approach is designed to this end.”

UK-Norway Co-operation
Norway signed a new treaty concerning cross-boundary petroleum co-operation in April, and the first announcement of the Enoch and Blane field development came in early July (as well as Boa and Playfair). Could you comment on the “fast track” process that has been made possible by the treaty? What do you feel will the most significant affect of this agreement over time?
“The Treaty stems from an industry recommendation that UK and Norwegian Governments clarify the regulatory regime for future transboundary projects, thus avoiding the need for individual treaties for each project. Enoch and Blane are the early fruits of the Treaty.

“While the Langeled South pipeline may well be the most high profile project to come forward under the new Treaty, I think that a further, important effect of the Treaty and the UK/Norway cooperation process, will be that the Governments can respond more quickly and innovatively to the industry’s desire to bring forward cross-boundary projects. “This has already been demonstrated by the approval of Boa and Playfair where an agreement to allow the fields to be regulated by the State with the majority field interest considerably simplified the process of bringing them into development.”

Langeled is one specific example of cross-boundary pipelines for transportation. Can we expect to see even more exports to the UK?
“The UK became a net importer of gas on an annual basis towards the end of last year and our import dependency will increase progressively. The Langeled South pipeline will considerably increase Norway’s capability to deliver gas to the UK and will add significantly to the UK’s future security of energy supply. “Further pipeline links between Norway and the UK are indeed already happening and we have recently approved the new link between the Statfjord field and the UK FLAGS pipeline that will provide further volumes of Norwegian gas.

“However, the widening gap between UK gas production and demand means there will be room in the market for a diversity of such projects. We are already seeing an enhancement of the UK’s gas pipeline links with mainland Europe and the construction of new LNG facilities.”

I believe that the UK and Norway need to continue to work closely together to maximise North Sea opportunities, including those as yet untapped accumulations around the median line.

Norway and Russia have recently signed an agreement of cooperation in light of developments in the Barents Sea. Are you planning or discussing closer co-operation with Russia or a new UK-Russia agreement?
“The UK cooperates closely with Russia bilaterally and through the EU-Russia Energy Dialogue. During the UK Presidency of the EU we plan to re-invigorate the Dialogue. We are playing an active part in meetings of Thematic Groups on trade, energy efficiency, investment and infrastructure (we are co-chairing the Infrastructure Group). This work will feed into a ministerial meeting with Russia in October where the EU with be represented by the UK, the Commission and Austria as the incoming Presidency.”

Maximise North Sea Opportunities
What about the future? What are the greatest challenges that face all those involved in the UK/Norwegian Continental Shelf in the coming years?
“I think much of what I have said above highlights many of the challenges likely to be facing us during the coming years. I think the key ones for the UK are to maintain secure energy supplies, and to make sure we realise the full potential of the UKCS, including our brownfields. In parallel of course there are other issues such as reducing harmful emissions, ensuring the proper and timely handling of decommissioning, and maximising the potential of infrastructure to bring in firm supplies from outside of the UK.

“I believe that the UK and Norway need to continue to work closely together to maximise North Sea opportunities, including those as yet untapped accumulations around the median line. UK and Norwegian Governments have an excellent relationship and our positive collaboration with the industry is bearing fruit. I intend to ensure that this continues, and that, through knowledge, understanding and co-operation, we are fully equipped to meet all of the challenges which the province brings in the coming decades.”