Newcomers step up as oil majors ditch old North Sea fields
* Outsourced operating model seen gaining favour
* Rise of NOCs will challenge conventional approaches
* Mature assets present biggest production challenges
LONDON, Nov 15 (Reuters) - Ageing North Sea fields are being abandoned by oil majors and increasingly rely on national oil companies (NOC) from countries such as China and large service providers to keep the oil - and tax revenues - flowing.
In the past, the company that owned the asset operated it, but as output from mature fields has dwindled and oil majors such as BP and Shell have sold out to smaller producers, traditional models have become less economic.
The number of fields in the UK Continental Shelf (UKCS) has multiplied from 90 to 300 in the last 20 years, but the average size of new fields is shrinking fast - from 248 million barrels of oil equivalent (boe) in the 10 years from 1966 to just 26 million from 2000 to 2008.
Now 90 percent of current fields produce less than 15,000 barrels per day (bpd), a tiny fraction of the 500,000 bpd that the Forties field produced in its 1970s heyday.
The industry urgently needs to adopt new operating models if it is to avoid leaving millions of barrels of oil in the ground as elderly platforms reach the end of their design life.
The British government, concerned about dwindling output and declining tax revenues from the North Sea, commissioned a review of the industry led by Sir Ian Wood.
The interim report called for greater collaboration by industry players in key areas such as the development of regional hubs and the sharing of infrastructure.
"You're seeing a resurgence of interest in an outsourced model aligned to increasing production efficiency in the North Sea," said Walter Thain, senior vice president for Europe at oilfield service company Petrofac.
"The outsourced operation model brings a lot more service company focus on the performance of the asset itself as the service operator's profitability is typically aligned to asset performance."
Outsourcing the operation of fixed platforms to big service companies would help the small independent producers that specialise in extending the life of old fields.
These companies lack the infrastructure to get their oil to market and need access to third-party platforms and pipelines.
But helping small rivals is at best a low priority for oil majors, and at worst unprofitable, especially if their own oil and gas interests in the area have dwindled.
Fortunately, China's CNOOC and Sinopec, Abu Dhabi's Taqa and Korea's NOC all seem willing to make big investments in the North Sea to keep the oil flowing.
Short-term profits are seen as less important than energy security and access to technical know-how.
"The purchasing logic for some of these guys might be different - they are playing a different game and don't simply need to deliver profitable barrels for the next quarter," said Philip Whittaker at the Boston Consulting Group.
"For someone like Taqa it's about showing they can build an international business, plus it allows them to acquire a well-trained workforce quickly. For Chinese companies like Sinopec or CNOOC it's about securing upstream supply."
NOCs are also likely to be more comfortable with service companies doing more for them due to their relative inexperience in the unforgiving environment of the North Sea.
This would be a break with the past, as the integrated oil companies (IOCs) have tended to be wary of surrendering day-to-day control to service companies due to competitive interests.
"The rise in prominence of NOCs will challenge the conventional approaches of the IOCs," said Dr Marcus Richards, chief executive of Dana Petroleum, which was bought by KNOC in 2010. "And the growth and increasing breadth of the service sector is creating a range of potential new operating models."
Petrofac's Thain added that NOCs and independent producers investing in mature fields weren't always interested in setting up huge organisations in the UK to operate their facilities.
"They also have a good handle on how these facilities are being operated now, and they are not necessarily being operated as efficiently as they could be," he said. "A number of their investments are in mature assets, and it's the mature assets that have the production challenges."
A 2013 global survey of 40 industry leaders found respondents expected more partnerships and joint ventures, with NOCs and service companies playing a much bigger role.
Some even saw service companies moving into infrastructure operator roles, taking equity interest in reserves and taking on production-related contracts.
"There is nothing in the system to stop it happening. It's whether the very large-scale service companies see it as something that they want to do," said Professor Rita Marcella, dean of Aberdeen Business School and co-author of the report.