Jeremy Beckman London
Drillers returning to frontier plays
Exploration drilling off Norway is veering north into the unknown, according to the Norwegian Petroleum Directorate's latest review. Most wells in the first half of this year focused on softer targets in the North Sea or Norwegian Sea, leading to small discoveries close to platforms for Esso, Norsk Hydro, and Statoil.
Norske Shell upped the stakes recently with 6406/9-1, the second well on its deepwater President blocks in the Norwegian Sea, considered the pick of Norway's 16th Round licensing awards. Although the first well two years ago was inconclusive, big hopes are riding on the latest campaign opening up a new exploration fairway.
Also in the Norwegian Sea, ChevronTexaco is preparing to test a stratigraphic prospect on the flank of the Donna Terrace, west of Statoil's Norne field and down-flank of Hydro's Maulk discovery, NPD says. Farther north, Hydro itself is lining up well 6605/8-1 at Fles Nord on the Upper Cretaceous Stetind prospect in the Voering basin.
Late November, Hydro and Statoil have a timeshare agreement for the semi Eirik Raude to drill three new plays in the Barents Sea. Hydro has first claim, with a well targeting Permian carbonates on the Loppa High structure.
Statoil will then take the rig to drill a Triassic, salt-related prospect in the North Cape basin, followed by a multi-level Jurassic/ Triassic probe on the eastern extremity of the Finnmark platform. All three wells are expected to take around a month to drill. Statoil has an extra incentive to achieve a good result – to smother the negative publicity mounting from its Snøhvit gas development in the southern Barents Sea.
Here, continuing cost overruns have pushed up the estimated project cost from NKr49.3 to NKr51.3 billion – way ahead of the NKr39.5 billion bill quoted on submission of the development plan in 2001. Acting Chief Executive Erling Overland admitted recently that Statoil had underestimated the project's complexity.
The cost issue is attributed mainly to late delivery of drawings and materials from the main contractor, poor productivity at the main fabrication yard, and sudden modifications required to the refrigeration compressors at the LNG plant on Melkoya Island.
Denmark joins gas export club
From Oct. 1, Denmark's state oil company Dong will start selling gas through the Dutch transportation network. Supplies will be exported eastward through a new 26-in. pipeline connecting the DUC-operated Tyra West field in the Danish sector to NAM's F/3 platform. From there, gas will head south to Den Helder via the Nogat trunkline. For the time being, the entire 500 MMcm/yr throughput is contracted to Dutch distributor Essent. Dong co-owns the new line with the DUC participants, AP Møeller, ChevronTexaco, and Shell.
Elsewhere in the Danish North Sea, development activity is stirring in most of the main field centers, according to the latest annual report from the Danish Energy Agency (DEA). At the largest field, Dan, in production since 1972, a new platform, Dan FG, is planned, featuring facilities for separation, produced water and gas treatment, compression, and water injection. Two years ago, the government approved operator Mærsk's proposal to shift from conventional to high-rate water injection for the area under the gas cap in Dan's southeastern quarter. Ongoing tests, due to finish in early October, will likely reveal increased recovery resulting from reservoir fracturing.
Last November, Mærsk submitted another plan to DEA to further develop the North Jens area in the Valdemar field. The program would involve add-ing a new 12-well platform and a bridge connected to the existing Valdemar A installation. Separation facilities would also be added, with wet gas transported through a new pipeline to Tyra West, with liquids heading through the existing line to Tyra East, where water processing is currently being expanded.
Danish gas has a new outlet into the Dutch sector via the Tyra West/F3 connector.
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Some time soon, DEA also expects to open Denmark's 6th licensing round, covering unlicensed areas west of 6° 15' eastern longitude. The agency sees best prospects for future finds in the productive chalk reservoirs in the Central Graben, but also in lesser-known plays in Jur-assic and Triassic sandstone. In its report, it cites Mærsk's attempt last year to prove hydrocarbons in the Triassic with the Olga-1X well south of the Kraka field.
UK looking for brownfield returns
Capital spending on UK field developments through 2010 is mounting rapidly, says the UK Offshore Operators Association. In its latest annual review, UKOOA foresees capex in this period rising 16% above the figure projected in 2002. However, no added production volumes are expected, suggesting that UKCS development costs are in danger of becoming unsustainable.
UKOOA is party to several pan-industry/government initiatives aiming to promote new activity at a reasonable price. The findings of one, the Brownfield Project, are due to be announced shortly. The "brownfield vision" aims to develop 5 billion further boe from UK fields already in production, and to identify the obstacles impeding new activity.
Working groups are addressing issues such as:
- Improving the UK's regulatory environment and the effectiveness of offshore asset trading
- Furthering development of new business models (small and mid-size independents have already shown the way by galvanizing previously dying fields)
- Technical barriers that have held up development of some large undeveloped heavy oil or high temperature fields
- The materiality of effort versus potential reward in the UKCS, relative to other world regions.
UKOOA believes new measures could help the UK remain self-sufficient in oil production through 2010, against current predictions of 75% self-sufficient. The impact on gas production could improve from the forecast 60% self-sufficiency to 75%.
One initiative tipped for imminent government approval involves re-working of the UK's existing Code of Practice on access to infrastructure, such as trunklines and platforms. This would promote greater access to data on pipeline tariffs and might allow the Department of Trade and Industry to step in to speed up negotiations between operators.
On the positive side, UKOOA sees an increase in both exploratory drilling and field development this year.
Investors have gradually regained confidence in the sector, following the unexpected increase in corporation tax imposed in 2002. By mid-year, 12 new projects had already been approved by the DTI, compared with 14 for the whole of 2003.
