The Fallow Process
Background
The fallow process was
launched in March 2002 by the PILOT Progressing Partnership Work
Group, a joint industry and government initiative.
This agreement was made in response to concerns that license
holders of UKCS assets were not maximising potential in exploration,
appraisal and production.
Note that Fields in Production, identified by a Petroleum
Revenue Tax ring fence, are excluded from the Fallow process but are
subject to scrutiny under Stewardship.
Since 2002,
there have been further adjustments to the time frames of the
scheme, which now operates as outlined below.
Explanation of the fallow process (PDF)
he Figure above outlines the
fallow process. Note
that BERR assess field development plans on a case-by-case basis and
these are guidelines only.
For more information, visit the
BERR website.
Fallow
Blocks
The fallow definition
currently stands as a block (or sub-area) where the initial term of
a licence (usually six years) has expired without there having been
drilling for a period of three years or dedicated seismic (or other)
activity for two years.
Blocks are
classified into Fallow A, where Licensees are ‘doing all that is
reasonably expected’ given technical competency and access to funds
or, Fallow B where licensees are ‘unable to progress towards
activity due to misalignment within partnership/ failure to meet
economic criteria/ commercial barriers etc.’ The classification of
Fallow A blocks is reviewed annually and these are listed on the
BERR website. Blocks
formally classified as Fallow B will be identified
as such on the website at the beginning of January, unless in
the three months following classification (following discussion in
the preceding September) companies have submitted a Firm Plan for
activity.
Fallow
Discoveries
Fallow discoveries are characterized where hydrocarbons have been
encountered but no Development Plan has been approved within three
years.
Fallow A discoveries have significant activity planned or underway within six
months and these are sub-classified into three categories: ‘linked’,
‘stranded’ or ‘active’.
- Fallow
A ‘Linked’ discoveries exist where investment for exploration or
development is approved and this could be either ‘clustered’
i.e. within or adjacent to blocks requiring exploration to be
completed prior to development or in close proximity to new or
existing development(s).
- Fallow
A ‘stranded’ discoveries can include situations where there are
constraints in infrastructure, technology or viable ullage (e.g.
heavy oil/ tight gas).
- Fallow
A ‘active’ discoveries refer to those which are newly fallow and
where significant activity is planned but not yet fulfilled.
Where a discovery
has been given a Fallow B
classification, licensees are given a three month period in which
they may present any plans for activity or declare intent for
reallocation of interests.
If this does not materialize, the end of this period is
termed the ‘release date’ and the asset is listed on the
BERR website for two years, during which time the Licensees are
free to market their asset.
The Licensees must declare any intention for significant
activity within the next 21 months or relinquish the asset (the
defined geographic area of the discovery is negotiated with BERR).
If, however, one or more of the Licensees or a third party
does submit a plan for activity, leading to a Field Development
Plan, then the discovery will temporarily be re-classified as Fallow
BR or ‘rescued’. In this
case, significant activity must be initiated within one year of the
plan being agreed.
Furthermore, when the significant activity is undertaken, the
discovery will be deemed not fallow for three years.
Further detail on
the classification and updated lists of fallow blocks and
discoveries are available from the
BERR website.
Success
of the Fallow Initiative
BERR have published
statistics on the impacts from the fallow process.
These are listed below.
These statistics can be accessed publicly
here
in the form of past BERR presentations and also
here on the fallow homepage.
For current information regarding the number of blocks and
discoveries on the fallow list, please visit the
DEAL or
BERR website.
Since the fallow process
began in 2002, and until January 2008:
- 92 wells
have been drilled on fallow subareas
- 190
block subareas have been relicensed
-
244 block subareas have been wholly or
partially relinquished to be offered in future rounds
- There
are 42 fallow B discoveries currently on BERR list
Operations Index
