Norway has seen the number of exploration companies double since 2000 and ranks among top ten global hotspots for petroleum exploration, according to a study by Wood Mackenzie. So what makes the Norwegian Continental Shelf so attractive?
During the past 13 years, the number of companies exploring offshore Norway has risen from 25 to 54. Small companies in particular represent a disproportionate amount of the estimated 153,000 square kilometres total available acreage on the shelf. They hold a significant amount of acreage, but relatively smaller amount of the USD 163 billion in total commercial value.
Top Ten Basin
The government’s 78% exploration tax incentive has really made an impact on the number of companies coming to Norway, says Malcolm Dickson, senior analyst for upstream research at Wood Mackenzie, during a press briefing in Oslo this May. But he believes there are many other factors attracting companies to Norway.
Norway offers explorers a politically stable environment to do business, USD 163 billion of commercial value, a great place to pioneer technology, and a highly prospective basin in terms of exploration. Despite being a mature market, the small Nordic country ranks ninth overall by discovered resources (technical and commercial), ahead of other petroleum nations China, Angola, Saudi Arabia, and Nigeria and in the Barents, it has one of the top emerging basins globally.
The Norwegian shelf also offers a very welcoming environment and healthy full-cycle returns. Norway is slightly above the average internal rate of exploration return of 15% (based on Brent at USD 85) at 20%.
“(Norway) is ahead on many metrics,” said Dickson.
One of the biggest recent contributors to this ranking has been the 2010 discovery of the Aldous find in North Sea block 16/2 followed by the 2011 discovery of Avaldsnes. Renamed Johan Sverdrup, the combined field development is believed to contain more than 2 billion barrels of oil (boe) equivalents, making it one of Norway’s largest discoveries since the mid 80s.
This giant find is just one of many. The Norwegian Continental Shelf has been the source of over 20 large discoveries of between 100-600 million boe in the past decade. Combined with the shelf’s low drilling density, this makes for a good subsurface potential with material prospects, says Dr Andrew Latham, vice president of Wood Mackenzie’s Exploration Service.
Barents Sea Prospects
Another area of the Norwegian Continental Shelf attracting a great amount of new exploration interest is the Barents Sea. The Norwegian Ministry of Petroleum and Energy awarded 24 production licenses in the 22nd licensing round in June 2013, 20 of which were in the Barents Sea and 23 north of the polar circle. Companies initially nominated some 181 blocks in the Barents Sea, the highest-ever number for a Norwegian licensing round.
Twenty-nine companies were offered participating interests, while 14 companies received operatorships. Among the newcomers is Lukoil. The Russian company secured partnerships in blocks 7321/8,9 with Britain’s Centrica (operator) and Norway’s North Energy and blocks 7130/4 (part), 7 with Sweden’s Lundin (operator) and North Energy.
The intense appetite up north follows Statoil’s recent large oil finds Skrugard and Havis in the Barents Sea. Ole Borten Moe, Norway’s then Minister of Petroleum and Energy, said this licensing round confirms the increasing interest in its northernmost seas and helps ensure future activity through these new licenses, which are expected to contribute to production in 10 to 15 years’ time.
“We are now laying the foundation for long-term and efficient exploration of our northern seas, in both the Barents Sea and the Norwegian Sea,” said Borten Moe.
The government also presented a proposal this April for opening up petroleum activity in the south eastern Barents Sea, the first new region opened for petroleum activity since 1994. The White Paper “New Opportunities for Northern Norway” presented to Parliament highlighted in particular the increasing importance of the petroleum industry in Northern Norway for creating new jobs and helping sustain local communities.
The petroleum ministry followed up this August by inviting oil companies to nominate blocks they would like to have included in the 23rd licensing round. This round will focus on the newly opened area in the south eastern part of the Norwegian sector of the Barents Sea, but will also accept nominations in the Norwegian and the North Sea. The deadline for nominations is January 2014.
Norway first began opening up the south eastern Barents Sea for petroleum activity in the spring of 2011. The areas included in the present recommendation comprise the southernmost part of the new region in the Norwegian side of the delimitation line with Russia. Under the historic treaty signed in 2010, Norway and Russia ended the 40-year dispute over the line in the Barents Sea and opened up the possibility for significant finds.
The new area is expected to increase the amount of undiscovered resources in the Barents Sea by more than 30%. The Norwegian Petroleum Directorate recently estimated the region’s oil and gas potential to be more than 300 million standard cubic metres of oil equivalents. If accurate, that would make the region the equivalent of eight fields the size of Eni’s Goliat oil field, which will start production late 2014.
Currently, 77 fields are in production on the Norwegian Continental Shelf. Last year, these fields produced about 1.9 million barrels of oil (including NGL and condensate) per day, and 115 billion standard cubic metres (Sm3) of gas. The NPD’s base estimates for discovered and undiscovered petroleum resources on the Norwegian Continental Shelf amount to approximately 13.6 billion standard cubic metres of oil equivalents, or about 85 billion barrels. Of this, about 40% has been sold and delivered.
Caption: One of the top emerging basins globally.
Source: Wood Mackenzie
Caption: ENI’s Goliat oil field in the Barents Sea.
Credit: Eni Norge