Nick Terdre, Contributing Editor
Since its emergence in 2001, Lundin Petroleum has established itself as Sweden’s leading oil company, with interests around the world and promising potential for growth, in particular in the North Sea, one of its core areas.
The company is 30% owned by the Lundin family, whose oil history stretches back 30 years. Its previous vehicle was Lundin Oil. By 2001, Lundin Oil had grown into an attractive property, which prompted a bid from Talisman Energy. The bid was accepted under a $400-million transaction.
The Lundin family, however, was keen to continue its oil adventure and put the original management team to work setting up Lundin Petroleum. Having started out with $75 million in equity capital, the new company is now worth $3 billion, according to president and CEO Ashley Heppenstall.
Lundin Petroleum’s portfolio of interests in- cludes production in France, Tunisia, the Neth- erlands, Norway, Russia, Venezuela, Indonesia, and the UK. The company has exploration interests in Sudan, Albania, Ireland, Vietnam, Congo (Brazzaville), and Ethiopia.
Production in the first half of 2007 averaged 37,900 boe/d. This is expected to rise to around 50,000 boe/d in a couple of years’ time when the Marathon-operated Alvheim field in the Norwegian North Sea is fully onstream.
TheAlvheim FPSO.
While taking on high-risk, high-reward engagements elsewhere around the globe, Lundin Petroleum has created a solid base in the North Sea. Of the company’s total proven and possible reserves of 176.4 MMboe (at June 30, 2007), Norway provided 47.2 MMboe (26.8%) and the UK 49.3 MMboe (27.9%). It is the cash flow from production in the UK in particular that has funded much of the expansion elsewhere, says Heppenstall.
The UK supplies close to half of the company’s current production. The output comes mainly from the Broom field in the northern North Sea, which Lundin operates. Broom is a tieback to the Heather field platform - Lundin acquired both assets from DNO in 2004.
A redevelopment project is also being implemented on Heather (Lundin 100%). Here the drilling rig has been refurbished and was used for a drilling program earlier this year. A new production well is planned for Broom (Lundin 55%), which has produced above expectation since coming onstream in 2004.
On Thistle, another field/platform in this area transferred from DNO, Lundin is operator for the remaining production phase, with a 99% stake. When production ceases for good, the asset reverts to the original owners, BP and ConocoPhillips, which retain the decommissioning obligation.
It is a mutually satisfactory arrangement, says Heppenstall, as Lundin’s efforts to prolong the field’s economic life are also deferring the day when BP and its partner must decommission the large steel platform and other field facilities. But that is not likely to happen in the foreseeable future. Lundin is now implementing a redevelopment plan, again involving reinstatement of the drilling rig and in-fill drilling.
Thistle has 15 MMbbl of remaining reserves on the books, but another 25 MMbbl of contingent resources have been identified, and the company plans to monetize them. In addition, Lundin has been talking to owners of potential satellite tiebacks, which include Petrofac’s Don West field and Antrim’s Causeway. Petrofac is also Lundin’s duty-holder on Thistle.
Exploration, development prospects
Lundin also has an active exploration program. In August, an operated well on the Lytham structure in the UK southern gas basin was plugged and abandoned as a dry hole, but Lundin plans to spud two more operated wells this year. The additional wells will be on the Ridgewood prospect in the outer Moray Firth and on the neighboring Scolty and Banchory prospects close to the Forties field.
In Norway, the delayed Alvheim development operated by Marathon is now expected onstream in the fourth quarter. Here, Lundin owns 15%, giving it net equity of 28.5 MMbbl. The company also has a 35% stake in Volund, which is due to come onstream in 2009 as a tieback to theAlvheim FPSO. Lundin’s net reserves are 17 MMbbl.
Lundin itself is considering development options for Peik (24/6), a gas/condensate field that it operates with around 40% interest. Peik, with estimated reserves of 27 MMboe, lies close to Alvheim and extends across the UK border. Commercial viability has yet to be established, Heppenstall says. A decision on development should come next year.
If the project goes ahead, the fact that Peik straddles the border is not seen as problematic. Cooperation between Norway and the UK has provided good precedents for cross-border projects, he says.
Another prospective development lies in block 7/7, also close to the median line. Here, Lundin (50%) operates the Nemo discovery, where its plans to drill an appraisal well. On the same block, but under a separate license, BG spudded an exploration well on the Orange prospect in September. Another BG-operated well will target Phi North in 6/3 (Lundin 40%), close to Armada.
Lundin spudded a well on Luno in block 16/1 (50%) in September as well. The company is also planning to appraise the South-East Tor discovery, which it operates with 75% interest.
Lundin also operates, with 35%, a license in the Barents Sea covering blocks 7120/1-6 close to Snøhvit. The initial obligation is limited to seismic investigation. This is high-risk, high-cost acreage, but with big prospect sizes, Heppenstall says. Winning such an operatorship is an endorsement of the capabilities of the Norwegian organization, which is well staffed with ex-Saga Petroleum personnel.
