Jeremy Beckman • London
Norway hands out license awards
Norway has issued 38 new production licenses under its latest Awards in Pre-Defined Areas (APA) round. The permits were spread between the North Sea (25), the Norwegian Sea (10), and the Barents Sea (three).
Out of the 44 companies that submitted applications, 39 gained participating interests, with 19 securing operatorships. These included Spain’s Repsol and US independent Bridge Energy, both first-time operators on the Norwegian shelf.
Among the domestic players, Statoil and Det norske oljeselskap each picked up six new operatorships; Lundin Petroleum, Marathon, and Wintershall, three of the more active foreign-owned contingent, will operate a total of 10 new licenses. However, with much of the acreage on offer close to mature North Sea fields, interest among the super-majors was mixed, with neither Shell nor Total featuring even in the partnership awards.
Three of the North Sea permits, operated by Statoil, Noreco, and Lundin, carry firm well commitments, while 16 of the licenses incorporate three-year “drill or drop” terms.
Having completed APA 2009, the Ministry of Petroleum and Energy immediately announced that 43 companies had nominated blocks for inclusion in Norway’s 21st offshore licensing round. The list comprised 307 blocks or part-blocks, with 138 blocks proposed by two or more companies. The Ministry expects to announce the areas on offer before this summer, with awards set to be issued in spring 2011.
UK introduces WoS gas incentive
Britain also has launched its latest licensing round. For the first time since 1998, blocks in the 26th round are on offer from all parts of the UK shelf, including some previously not explored. Also available are the majority of areas licensed under the UK’s 1st Round in 1964 which have not been granted extensions; and 14 blocks relinquished under the UK’s Fallow Initiative, designed to stimulate activity on concessions where there has been no significant work for the past three years.
Additionally, the Department of Energy and Climate Change (DECC) introduced a new Frontier license with an extended nine-year exploration term for the West of Shetland area. Simultaneously, the government announced it would extend its new field tax allowance to West of Shetland gas fields. The aim is to encourage investment in gas infrastructure in this hostile frontier region, where there have been discoveries in the past few months.
Industry association Oil & Gas UK responded favorably to the news. Potentially, according to Chief Executive Malcolm Webb, the new allowance could trigger investment in facilities totaling over $22 billion over the next eight years, helping to bring 2 Bboe of new reserves into production. Establishing new infrastructure also would encourage further exploration in the area, he added.
Drilling slips back, surveys claim
Incentives are sorely needed, with two reports painting a bleak picture of UK upstream activity. According to a survey by Deloitte in Aberdeen, only 78 new exploration and appraisal (E&A) wells were spudded on the UK shelf last year, down from 121 in 2008. This has pushed drilling back to levels last seen in 2004. In the final quarter of the year there were only 13 new well starts, the lowest total for a quarter since 2Q 2003.
The northern North Sea suffered the worst slump in 2009, down 65% compared with activity in 2008, followed by the southern gas basin (down 60%), and the central North Sea (47% lower). The one bright spot was West of Shetland and the Atlantic margin, where there was a 23% surge in drilling. Deloitte’s Managing Director Graham Sadler attributes the general downturn to a combination of macroeconomic conditions, oil price volatility, rig availability during the first part of 2009, and cost control pressures.
Wood Mackenzie’s review found that just 140 MMboe of new reserves were brought onstream from UK offshore fields last year, the lowest in the shelf’s history, and the number of new fields entering production was eight – a nine-year low. Furthermore, only six new fields gained development approval, down from 12 in 2008.
The analysts also claim that the number of companies operating wells was down from 43 in 2008 to 24 in 2009, reflecting the paucity of operators willing – or able – to finance UK E&A programs. Despite the tail-off in drilling, 315 MMboe was discovered last year, an increase of 70 MMboe over the previous year’s total.
Maersk hits target in Luke
Danish sector exploration also has fallen back, although there have been a couple of new discoveries. The latest was Maersk’s Luke 1-X well on the western edge of the Danish North Sea, in license 8/06, which proved gas-condensate in Mid-Jurassic Bryne formation sandstones. The well was drilled in 40 m (131 ft) of water by the jackupMaersk Resolve, a short distance east of Elly, another gas-condensate find in Maersk’s locker. The partners plan to evaluate Luke to judge whether the reserves warrant development.
DONG Energy and its partners Bayerngas and the Danish North Sea Fund have opted to resume appraisal drilling on Svane, one of Denmark’s largest untapped gas resources. DONG inherited the high-pressure/high-temperature field on acquiring ConocoPhillips’ Danish sector interests in 2007.
Svane is located at a greater sub-surface depth – 6,000 m (19,685 ft) – than any other field on the Danish shelf. The demanding reservoir conditions caused problems during the original drilling program. To address these challenges, the partners will first formulate a strategy for the appraisal program before committing to a timetable for drilling, which is expected to cost DKK0.6-0.9 billion ($110-165 million). If the next well is successful, it opens up the possibility of developing other fields of this type on the shelf, according to executive VP Soren Gath Hansen.
Elsewhere in the sector, DONG has brought the Siri field back onstream five months after an enforced shutdown following the discovery of cracks in a water buffer structure connected to the oil storage tank beneath the Siri platform.
The temporary solution in place involves supporting the subsea structure with a metal frame to ensure stability. DONG expects to implement a permanent repair later this year. In the meantime, production through the platform has been climbing rapidly, with new wells being brought on line from the Nini, Nini East, and Cecilie satellite fields.
