On April 1, Statoil struck oil in the Barents Sea well 7220/8-1, the largest find on the Norwegian Continental Shelf (NCS) in a decade. The discovery has inspired an unprecedented enthusiasm for petroleum exploration in the far North, particularly in the wake of a historic maritime delimitation agreement this year between Norway and Russia, which opens for petroleum cooperation.
Norwegian oil company Statoil and its partners Eni and Petoro made the discovery on the Skrugard prospect, which is located 100 kilometres north of the Snøhvit gas field in the Barents Sea. Oil was proven in the Bear Island fault zone, which is further north than the Hammerfest Basin, where Statoil’s Snøhvit and Eni’s Goliat fields lie.
Statoil anticipates that the find could hold between 150-200 million recoverable barrels of oil equivalents, with a potential for a further upside in the order of 500 million barrels. Although it is still too early to say what the find means for the total potential of the area, it is clear that it is the most important exploration event on the Norwegian Continental Shelf in the last decade.
“The Skrugard find is significant and a breakthrough for frontier exploration in the Barents Sea,” said Tim Dodson, Statoil executive vice president for exploration, in April. “This opens a new oil province that can provide additional resource growth.”
The find is small compared to the enormous finds from previous decades. Ekofisk, the first discovery on the Norwegian Shelf, is still producing oil and gas since coming onstream in 1971 and contains three times as much as Skrugard.
Still, the Barents Sea discovery is a welcome relief to the maturing Norwegian Shelf, which has seen petroleum output on the wane since its peak in 2001 due to a lack of significant finds and falling oil production.
According to the Norwegian Petroleum Directorate, the country’s 70 fields in production pumped more than 2.1 million barrels of oil per day and 106 billion standard cubic metres of gas last year as the world’s seventh largest oil exporter and second largest gas exporter. At its peak a decade ago, the country produced as much as 3.4 million barrels of oil per day.
The country’s hopes for increased production have been stymied by political resistance to developing the promising oil resources offshore Lofoten. The area, known for its fishing stock and unique nature, is listed on the UNESCO World Heritage tentative list and considered environmentally sensitive. The centre-left government has agreed to a compromise in the meantime to study the area, but not as a formal feasibility study because that could imply a possible development of the area.
The current focus is farther North, where there is a particular hope that the Barents Sea could provide a much needed boost to Norway’s production profile. The US Geological Survey estimated in 2008 that up to 22% of the world’s undiscovered petroleum resources could be in the Arctic, mostly as gas offshore Russia.
The recent agreement between Norway and Russia will further encourage hopes for recovering these reserves. The two countries signed the historic treaty last year on maritime delimitation and cooperation in the Barents Sea and Arctic Ocean, ending a 40-year dispute over the area.
The agreement, which was ratified by both countries’ parliaments this summer, implies a sharing of 175,000 square kilometres area into two equal parts. The treaty also contains provisions on how Norway and Russia cooperate on exploiting any discovered trans-boundary petroleum deposits.
Statoil is currently active on several petroleum projects in Russia. The company is partner in the Kharyaga field development, which has been producing since 1999, and is a partner in phase 1 of the Shtokman development, one of the world’s largest undeveloped offshore gas fields. Statoil also works with Russian companies on international projects.
“We were successful in winning the bid for the West Qurna 2 project in Iraq together with Lukoil (the project’s operator),” said Statoil. “We believe that the treaty concerning maritime delimitation and cooperation in the Barents Sea and the Arctic Ocean signed in September 2010 will also open new and exciting opportunities in this respect.”
North Sea Revival
In addition to the Barents Sea, Statoil has recently revived interest in the mature North Sea area through the groundbreaking discovery Aldous Major South. The company announced in August that well 16/2-8 had common oil/water contact with the nearby Avaldsnes structures, giving a combined discovery potential in the two licenses of between 500 million and 1.2 barrels of recoverable oil. At the highest case scenario, it could be one of the ten largest oil finds on the NCS.
“Norway has not seen a similar oil discovery since the mid 1980s,” said Dodson. “The Aldous/Avaldsnes discoveries are evidence that the NCS is still attractive.”
Statoil is operator of the Aldus Major South license, together with partners Petoro, Det norske oljeselskap and Lundin. Lundin is the operator of the Avaldsnes license, with Statoil and Maersk as partners. The license partners plan further appraisal drilling in the Aldus Major South license next year to clarify the full volume potential of the discovery for a future development solution.
“The find confirms what the oil directorate and companies have been aware of for a long time, namely that there is formed oil in the area around the Utsira High,” said Johannes Kjøde, NPD assistant oil director. “The oil companies have been drilling here since the 1960s, but in shallower layers. New technology, new seismic data and new interpretations of old data have lead to several interesting finds in the past years.”