Jeremy Beckman • London
Heavy guns drawn to frontier round
Norway has opened frontier areas to exploration in its 20th licensing round. Thirty-four companies will participate in 21 production licenses covering a total of 79 blocks – 51 in the Norwegian Sea and 28 in the Barents Sea.
Awards in the north and west of the Barents Sea are in provinces not previously explored. In the Norwegian Sea, several blocks are in deepwater in the Voering basin. Some are out to the northwest, a region shaped by substantial volcanic activity. According to the Norwegian Petroleum Directorate, there will be difficulties mapping prospective levels in this area due to a thick underlying lava layer.
Fifteen companies gained operatorships; most are established players on the Norwegian continental shelf. The exception was North Energy, based in Alta, northern Norway, which was only qualified as an NCS operator this March. The company was awarded a license off the Helgeland coast, just south of the Nordland VI and VII areas which environmental groups want cordoned off. North Energy has promised to work closely and openly with local fishermen.
Det norske oljeselskap, the country’s second-ranked independent, only gained 20% of one license (533) at Loppa Vest in the Barents Sea, in partnership with Eni. The company had hoped to operate neighboring license 532 also, but this went instead to StatoilHydro. Detnor says there are strong seismic indications of hydrocarbons in both of the areas covered.
Among the other awards, Chevron picked up its first deepwater license in the Norwegian Sea: this covers nine blocks in 1,000 m (3,280 ft) of water 155 mi (250 km) west of Kristiansand in the Outer Voering basin. BG operates a 900-sq km (347-sq mi) license in the southern Barents Sea. According to partner Faroe Petroleum, the acreage is next to three recent discoveries by StatoilHydro. It includes a large structural feature called the Samson Dome, the crest of which was drilled in 1988, producing hydrocarbon shows.
Gas boost for Denmark
Maersk has completed drilling of the Gita-1X exploration well in the Danish North Sea. The well, drilled in 49 m (161 ft) of water 10 km (6.2 mi) south of the Harald field, encountered gas in Middle Jurassic sandstone layers.
Gita straddles licenses 9/95 and 9/06. Noreco Energy, a partner in both, claims this could be a major gas discovery, with base case reserves of 250 MMboe and potential resources of 600 MMboe. Noreco also owns 30% of the nearby Amalie, another Mid-Jurassic gas condensate find.
Gita well location.
Germany’s Bayerngas, which has been amassing offshore acreage across Scandinavia, has reinforced its position through acquiring StatoilHydro’s remaining assets on the Danish shelf. These comprise interests in five licenses formerly owned by Saga Petroleum.
Life extension scheme for Gullfaks
StatoilHydro is looking to extend the production life of its Gullfaks South field in the Norwegian Sea. It has contracted Framo Engineering to implement subsea wet gas compression on the field, a satellite to the Gullfaks complex.
According to Ingrid Honsi, head of the Gullfaks 2030 project team, subsea compression would allow gas to be drawn more easily from Gullfaks South to the Gullfaks C platform – the two are connected by three 15-km (3.9-mi) pipelines – and make better use of electrical power facilities. The goal is to lift recovery from the satellite by 3 bcm (106 bcf), and in the longer term to transfer the compression technique to larger Norwegian fields.
A short distance to the south, StatoilHydro has boosted its gas inventory in the Oseberg area with a new discovery 7 km (4.3 mi) northwest of the Oseberg C platform. The well on the Corvin prospect did not find hydrocarbons in its primary targets, but did prove gas in a 550-m (1,804-ft) thick zone in Upper Triassic reservoir rocks.
Tax changes favor complex fields
Britain has introduced changes to its upstream fiscal regime which are designed to incentivize development of marginal and technically challenging fields. The government recognizes that the UK industry needs help in the face of rising costs and finance constraints.
New field developments on the UK shelf normally incur corporation tax at a rate of 30% and another supplementary charge of 20%. Under the new measures, applicable to projects yet to receive development approval:
- Fields with reserves below 20.5 MMboe will receive a total allowance of £75 million ($113 million) against supplementary charge profits
- Heavy-oil fields with gravity below 18º API and viscosity higher than 50 cp will be eligible for an allowance of up to £160 million/yr ($241 million/yr), and up to a maximum of £800 million ($1.207 billion), against supplementary charge profits
- HP/HT fields with a reservoir temperature above 176.6º C (349.9º F) and pressure above 14,993 psi (103 MPa), will gain similar value allowances, also offset against profits.
Analyst Wood Mackenzie believes the measures will not be sufficient to spur investments in small fields. But the value allowances could have a significant impact on heavy oil and HP/HT projects. Based on assessments of three model fields, one containing 200 MMbbl of ultra heavy oil, the others 35 and 80 MMboe of ultra HP/HT hydrocarbons, Wood Mackenzie calculates an increased post-tax net present value (NPV) ranging from 17-55%.
Nautical Petroleum, a specialist in heavy oil in the northern North Sea, claims the new allowance will lift the value of its shares in the Kraken and Mariner fields by £99 million.
In a separate development, the government has contracted Aberdeen-based Senergy to investigate ways to maximize hydrocarbon recovery from the UK shelf via better stewardship of existing fields and deployment of advanced technologies on new field developments. Senergy also will assess the potential of unexplored areas and discoveries that have proved difficult to commercialize.
Marathon exits Kinsale
PSE Ireland, a subsidiary of Petronas, has completed its acquisition of Marathon’s interests in the Celtic Sea for $180 million. These include 100% of the Kinsale Head Area, including the producing Kinsale Head, SW Kinsale and Ballycotton gas fields; 86.5% of the Seven Heads tieback to Kinsale; and outright ownership of an associated gas storage complex in southern Ireland.
Net production from these operations currently average around 30 MMcf/d.
