INTERVIEW: UK’s Serica eyes output hike amid North Sea consolidation

UK player Serica Energy is targeting 80,000-100,000 boe/d of oil and gas production through organic and inorganic growth in the North Sea, despite a fiscal environment that has made the basin "uninvestable" for many operators, CFO Martin Copeland told Platts, as he predicted further consolidation in the sector.

Serica is currently pumping just over 30,000 b/d from its 10 producing assets, most of which it operates. Those include the key Bruce and Triton fields, as well as the NEO Energy-operated Greater Buchan Area. That is below its potential maximum run rate of around 50,000 boe/d, Copeland said, due to operational challenges this year.

Yet the company is also in the midst of a growth drive, following a string of acquisitions, and plans to hike output by improving operating performance, spying tie-back opportunities, and pursuing further M&A, he told Platts, part of S&P Global Energy.

"Our goal is to get bigger, which is really about growing diversification of cash flows and production. We think that translates into a higher quality of earnings," Copeland said. "We are quite small and therefore there is plenty of room for us to grow."

He described a growth target of 80,000-100,000 boe/d as "a medium-term aspirational goal" that cannot be reached "in one go".

Mature fields

Serica has underperformed this year because of more unscheduled maintenance than expected across its aging North Sea portfolio, particularly its key Triton asset.

"Assets in the North Sea are getting on in age. Reliability, integrity, making sure that the maintenance is done to keep the uptime high" is a key focus area, Copeland said.

The executive said Serica had carved out a niche eking additional barrels out of mature fields -- with strong subsurface expertise -- including the Bruce platform, which it acquired from BP in 2018. That asset might have ceased production by now in BP's hands, but has instead seen its lifespan extended to 2035 with plans to push that to 2040 through additional drilling, platform upgrades and operational efficiencies, Copeland said.

"Being able to operate leaner and meaner than BP would do. Drilling more wells, adding additional capability, upgrading the platform to extend its life," Copeland said of the company's record.

Serica is planning to drill anew in 2027 on Bruce's biggest reservoir, where no well has been drilled since 2012. At Triton, meanwhile, the company has drilled five wells that have all been "really successful from a subsurface perspective."

These assets -- and other non-operated fields such as Greater Buchan -- are expected to drive organic production growth for Serica moving forward. "There's plenty more to go after," Copeland said.

On the inorganic side, he said there is "more to come," with a lot of companies merging or selling North Sea assets. "That is in many ways a reaction to the challenging environment in which we find ourselves," he said.

It follows a trio of deals agreed by Serica since 2024.

In October, it agreed to buy BP's 32% stake in the country's highest-producing gas field, Culzean, one month after agreeing to buy the upstream business of Prax Group, which includes the planned takeover of TotalEnergies' Greater Laggan gas assets. It obtained its Greater Buchan redevelopment stake in early 2024.

Several North Sea grades are among the crudes that comprise the Platts Dated Brent benchmark, which was last assessed at $62.82/b on Dec. 9.

Budget disappointment

Copeland was speaking in the days following UK chancellor Rachel Reeves' budget, which the oil and gas sector had hoped see reforms to the contentious Energy Profits Levy.

Dubbed a "windfall tax" when introduced in 2022, the EPL has hiked the North Sea tax rate to 78%.

Having been increased and extended by Keir Starmer's Labour government, the EPL is due to expire in 2030. Ahead of the budget, Offshore Energies UK, a lobbying group, said scrapping the levy would inject GBP50 billion of investment in the North Sea, but Reeves opted not to.

The tax has also fueled mergers in the basin, with companies looking to combine tax allowances.

"I think Treasury was persuaded of the economic rationale of a growth-oriented reason to cut this tax, but the politics of it would have been difficult," Copeland said, noting other tax rises in the budget.

Proponents of the policy say the five-year lead time for new developments makes now a good time to invest in upstream projects, but Copeland said the damage might have been done.

"The problem is they've sent the signal to boardrooms to say this is an uninvestable, high tax environment," he said, taking issue with government claims that recent North Sea oil production declines are inevitable due to excessive E&P activity. "It's policy, not geology, that's causing the problems."

He noted, however, that the government's plan for an oil and gas price mechanism to replace the EPL is a step in the right direction, cautioning that the details were still to be ironed out. The thresholds for oil and gas prices that trigger the higher tax rate are significantly higher than with the EPL, at $90/b for oil and 90 pence/therm for gas.

"They set the rates at levels that are broadly sensible," Copeland said.

The government also said it would introduce transitional certificates for tie-back developments to extend the lifespan of North Sea projects. While further detail is required, that also shows "at least a sensible element of policy," Copeland said.

However, he cited continued concerns about supply chain degradation and key infrastructure viability in an uncompetitive North Sea environment through 2030, thanks to the retention of the EPL.

International expansion

Given the challenging UK fiscal and regulatory environment, Serica is considering opportunities beyond its shores, Copeland said, although it remains committed to North Sea consolidation in the near term.

"We have made it clear strategically and to our shareholders that we would like to have a presence in at least one other basin," Copeland said. "We haven't defined where that basin is. We don't want to limit it too much."

West Africa is one option, although Copeland said the company lacks regional expertise. Norway is attractive but presents a high price for entry.

"Somewhere where the same business model that I've set out before," he said summarizing the strategy, "[taking] offshore mid to late-life assets where you can add subsurface value."