History of PROSPEX
Article by Jim Munns, GDF SUEZ E&P UK Ltd, part of the ENGIE Group
The Prospect Expo as PROSPEX was originally called in 2003 had its birth during the recovery from the downturn in the late 90s. In 2003 the industry was still recovering from a collapse in oil price to less than $10 a barrel in 1998, and although the general atmosphere was improving activity levels were still low particularly Exploration and Appraisal well drilling. The Oil and Gas Industry Task Force (the precursor to PILOT) was working to stimulate activity across the oil and gas sector. Interestingly the UK North Sea high cost structure was a discussion point in the early 00s and is still a discussion point in 2015! Now we have the reality of stacked drilling rigs in the UK Moray Firth and exploration drilling at an all-time low. As ever there is also the reality of competing for funds on a global basis with “hot” basins around the world.
The commercial backdrop in the early 00s was framed by several key events:
- There had been a series of mega-mergers with the BP/Amoco/Arco and Total/Fina/Elf mergers and the advent of ExxonMobil and ConocoPhillips. A stark statistic is that over half of the E&A wells in the nineties were drilled by BP, Amoco and Arco and these three became one.
- The 21st licensing round in 2000 attracted only 36 applications
- Geoscientists were being laid off in large numbers
During 2001 to 2002 the DTI embarked on a Promote UK initiative. There was a realisation that as the oil price recovered exploration drilling activity was not following as the newly merged super-majors had turned their eyes to more exciting climes such as West Africa and Brazil and that the UKCS needed to attract a new generation of exploration companies to reinvigorate activity. The DTI formalized the Promote UK brand and a small team (Peter Haile and me, supported by Simon Toole when available) wandered the world (well mainly North America!) marketing the UKCS to mainly independent oil and gas companies of all sizes. This was an exciting time and the Initiative was successful with a number of US and Canadian companies entering the UK and some are still here today; although inevitably some have tried it and left. Hannon and Westwood talked about the growth in companies active from 78 in 2004 to 140 by about 2011. The advent of the Promote Licences introduced by the DTI occurred at about the same time and led to a very significant increase in the number of licences awarded from 2004 onward to international New Entrant companies and UK based promoters (see chart below).
Chart to show the rapid increase in licence awards post 21stRound in 2001
One amusing event occurred in Houston where we met with the CEO and his team at a large independent who talked to us about how great Australia was for a few minutes, suddenly realised who we were and without batting an eyelid talked about his companies aspirations for the UK. They are now very active in the UK!
During this period we came across the NAPE Prospect Exposition held in January each year in Houston and attended by thousands of people. It is a large “clearing house” for prospects. Alan Booth (then Encana) and I were talking about it during lunch and decided to push the idea for the UK. I championed it at the DTI and Alan through PILOT. The first Prospect Expo was held in 2003 with the “Prospects to Go” branding and the rest as they say is history. There have been 12 Prospect Fairs to date; approximately 120 prospects have been presented with a number sold and drilled. In fact in my life following the DTI I farmed into two, both dry holes although one of the blocks did have a follow up discovery!
I remember the first Prospect Expo very clearly because there was a real concern that it would be a flop! We held it in a smallish hall in Islington Business Centre as it would appear busy even if the turnout was small! In the event it was great success; and in the early years was quickly established as a great networking opportunity for small “prospectors” to meet larger companies and investors with cash to invest.
The Promote CD has been a great success also with the annual update summarising prospects and leads mapped by the BGS/DECC on open blocks on the UKCS.
The first Prospect Expo was the opportunity to “tell the story” of the early movers and shakers in the Promote world. Miles and Isabel Newman had formed Reach Exploration a couple of years earlier and applied for blocks in the UK 20th Round with the strategy to licence blocks on an evaluation work programme basis as a precursor to farming out any mapped prospects to get wells drilled and minimise their own financial exposure. The DTI realised that during the mega-mergers of major E&P companies that many geoscientists with innovative ideas for new prospects had left the Majors and were struggling to find work in the very tight job market. The breakthrough idea was to licence blocks on a reduced cost basis i.e. 10% of the traditional cost to allow these new entrepreneurs to stimulate activity through the farm-out process. There were a number of other small companies formed at this time using similar business models but they are too numerous to name without being selective!
The combination of the Promote Licences and the Prospect Fair as it became in 2004 stimulated significant activity and in 2012 the DECC gave a talk at PROSPEX summarising the success of the Promote Initiative with the following metrics:
- 59 E&A wells drilled on Promote licences
- 28 successful wells drilled
- 3 new producing fields
- 2 pending FDPs awaiting approval
Many of these early “Promote companies” have disappeared now for various reasons with some being sold to larger companies for significant amounts of money. I am sure there are a number of “Promote millionaires” who could tell their story but that is for another day!