Jeremy Beckman
Editor, Europe
Various surveys at the turn of the year painted a gloomy picture of the E&P prospects on theUK shelf. Wood Mackenzie pointed to the fall-off in companies able, or willing, to finance exploration and appraisal drilling in the sector. Deloitte added that the total of new well starts in the final quarter of last year was the lowest since 2003. In February, industry association Oil & Gas UK warned of a decline in the volume of reserves both under development and in production, and urged intervention from the UK government in the form of lower production taxes.
But there have been chinks of light. There was an upsurge in frontier region exploration last year, notably west of the Shetlands, bringing deepwater oil and gas discoveries for OMV (Tornado); DONG (Glenlivet); and for Hurricane Exploration (Lancaster), the first planned exploration well on a basement target on the UKCS.
In January, the UK Treasury announced it would extend its new field tax allowance to West of Shetland gas discoveries, to incentivize investment in development infrastructure in this hostile environment. Not long afterwards, Total committed to a subsea development of its Laggan and Tormore gas fields in this region, under a near $4-billion scheme involving construction of long-distance undersea trunklines to Shetland and the Frigg export system in the northern UK North Sea.
BP has also revealed plans for a $6 billion second-phase development of its Clair field, 75 km (46.6 mi) west of Shetland. The Clair Ridge project will call for two new giant platforms delivering production of up to 120,000 b/d, with associated gas probably heading through spare ullage in the Laggan/Tormore system. Chevron's Rosebank/Lochnagar fields close to the Faroe Islands could also ship gas through this network. Last year, the US major commissioned Intecsea and Norway's Sevan Marine for platform/subsea evaluation studies for what would be the UK's deepest-water development to date.
Things are also stirring in the UK central North Sea. ConocoPhillips recently awarded a contract to Saipem for engineering, transport, and installation in 2011-12 of three platforms with a total weight of over 30,000 tons (27.215 metric tons) for the high-pressure, high-temperature Jasmine gas-condensate field development in 80 m (262 ft) water depth. One of these structures will be a new riser/separation platform linked to the existing Judy complex. Another hub project could soon have lift-off in blocks 20/1N and 20/1S in what operator Nexen calls the "Golden Eagle Area," combining a three series of discoveries with potential gross resources of 275 MMboe.
Computer-aided image of the Ekofisk 2/4 L accommodation platform, one of two large Norwegian construction contracts issued recently to Far East yards.
Independents have found finance constraints squeezing their smaller-scale projects, but there have been exceptions. Ithaca Energy is pursuing development of its Athena oil field in the central sector, with a letter of intent for the FPSOBW Carmen. Farther north, Antrim Energy is evaluating floaters for its heavy oil Fyne field, while Premier Oil may opt this year for an FPSO for its Huntington project.
Some significant subsea projects are also in prospect. BP is looking to tie back its large Devenick gas-condensate accumulation to Marathon's east Brae platform. BP has also been studying potential application of subsea processing on its developed Foinaven oil field west of Shetland. Apache plans to further extend the life of its Forties A platform through tieback of the 2005 Bacchus discovery facilities. And Fairfield, the new operator of the decommissioned North West Hutton field, aims for a re-development via its Dunlin platform.
Mixed picture off Norway
Last year a record 65 exploration and appraisal wells were drilled offshoreNorway, according to the Norwegian Petroleum Directorate (NPD). This activity led to 19 discoveries in the Norwegian Sea and 21 in the North Sea. The Barents Sea was totally overlooked, although two or three wells are forecast in this region during 2010.
Interest in the sector remains strong, with 42 companies gaining interests in 38 new licenses across the shelf earlier this year under Norway's latest Awards in Pre-Defined Areas licensing round. A similar number of respondents have nominated 307 blocks for inclusion under the country's forthcoming 21st licensing round.
Many of last year's finds were relatively routine near-platform pickings for the sector's leader Statoil. Others were the result of high-profile wells in frontier regions, but with disappointing results. For instance, Total's appraisal well on the complex Jurassic gas discovery Victoria in Norwegian Sea license 211 B appears to have downgraded recoverable reserves to 20-60 bcm. In the same region, Statoil's appraisal well on the northern part of the Ormen Lange field found a gas-water contact at a shallower level than the rest of the structure, raising doubts over its long-term producibility.
Shell found gas in Upper Cretaceous horizons while drilling the Gro prospect in Norwegian Sea license 326. The water depth of 1,376 m (4,514 ft) was the deepest to date for a Norwegian well, but the outcome was uncertain, with preliminary estimates in the range 10-100 bcm. Elsewhere, there were lower-key oil find successes in the North Sea for Marathon (near the Alvheim FPSO), Petro-Canada, Talisman Energy (Grevling, close to Varg), and Wintershall (Grosbeak).
Development activity slowed down markedly on the Norwegian shelf in 2009, but as in the UK, there has been a sudden upturn of late. Statoil and partners Marathon and GDF Suez have approved a $1.17 billion plan for the 132 MMboe, high-pressure, high-temperature Gudrun field in the North Sea, discovered in 1974. Aker Verdal won the first major contract, for the 16-slot platform's 7,100-metric ton (7,826-ton) steel jacket. Production will be exported following part-processing to the Sleipner complex to the south.
This success for Aker offset the disappointment of missing out on the FPSO for the Goliat field in the Barents Sea, which operator ENI awarded to Hyundai Heavy Industries under a NOK 6.9 billion ($858.5 million) contract. More recently, a $550 million order for a 10,000-metric ton (11,023-ton) topsides consignment also went east, this time to Sembcorp Marine in Singapore, for ConocoPhillips' new 2/4L accommodation platform for the Ekofisk South development. Saipem'sS7000 will install this and the related 2/4Z wellhead platform in 2012-13, in water depths of 70-80 m (229-262 ft).
Among other ongoing projects, ENI recently contracted FMC for a subsea production system for the 30-km (18.6-mi) tieback of the Marulk field in the Norwegian Sea to Statoil's Norne FPSO. Statoil has awarded Aibel a FEED contract for topsides and living quarters for a platform on the Valemon field. And Sevan Marine is working on potential applications of its cylindrical FPSOs for Statoil, BG Norge, and Det norske oljeselskap for the Froy field re-development in the North Sea.
Ireland, Denmark revival
Off theFaroeIslands, Eni is preparing to drill the Anne Marie prospect in License 005 this spring. The Faroese government reports two other new commitment wells in its waters, one to be drilled by Statoil in either license 006, 009, or 011. This follows the recent extension of the latter three licenses through 2013.
Serica Energy discovered oil while searching for gas last June in the Slyne basin off westernIreland. Although the find was non-commercial, the company is stepping up its activities in the region, focussing on a prospective deepwater gas structure named Muckish in its newly awarded FEL 1/09 exploration license in the Rockall basin. Only three wells have been drilled to date in this frontier basin, including the 2002 gas-condensate discovery Dooish.
In the north Celtic Sea basin off southern Ireland, Providence Resources has been awarded a licensing option over the undeveloped Baltimore heavy oil field in 100 m (328 ft) water depth. Providence hopes to apply new development techniques which Statoil is pioneering on other similar fields in the Norwegian and UK North Sea.
Two Dublin-based companies, San Leon Energy and Island Oil and Gas, plan to merge, with the aim of monetizing various small gas fields in the Celtic Sea through the Kinsale production facilities, and also stepping up seismic acquisition on the Irish Atlantic Margin.
The Dutch House of Representatives passed a proposal last September for a marginal offshore field tax incentive. This was designed to simulate development of certain categories of reservoirs offshore theNetherlands. Analysts Wood Mackenzie calculated that the incentive – if enacted – could add 44% to the net present value of a marginal 15 bcf field. But this would not be enough to stem the decline of production from numerous small Dutch fields expected from 2011 onwards, Wood Mackenzie predicts.
As ever, a few players continue to drive the Dutch offshore E&P sector. Among the majors, Total is developing its K5CU gas field in the K5-B area via a new unmanned satellite platform linked to the existing K5A riser platform. Subsea 7 is due to install connecting gas and di-ethylene glycol pipelines this summer. Wintershall plans to develop the Wingate field in the UK southern gas basin via a tie-back to its D/15-FA1 platform in Dutch waters. And Petro-Canada has reportedly issued tenders for single-well subsea tiebacks of its Van Nes and Van Ghent discoveries to the De Ruyter platform.
The picture looks brighter offshoreDenmark. Over the past year Maersk has had exploration successes drilling the Mid-Jurassic sandstone structures Luke, in the far west of the Danish North Sea, and on Gita, 10 km (6.2 mi) south of the producing Harald field. Gita straddles two licenses, and could contain 250MMboe recoverable with substantial upside, according to partner Noreco. Also in the western sector, Wintershall found further oil with an appraisal well on the 1986 Ravn discovery.
Castoro Sei was due to start laying the Nord Stream gas pipelines in the Baltic Sea last month.
DONG rectified subsea structural issues which halted production from its Siri facilities, then added further volumes from the newly onstream Nini East platform. DONG also announced its intention to appraise Svane, the deepest discovery on the Danish shelf to date at 6,000 m (19,684 ft) sub-surface, and possibly Denmark's largest undeveloped gas field. Work on the high-pressure, high-temperature reservoir will be costly, however – DONG and partner Bayerngas have earmarked up to $164 million for appraisal drilling.
Hess, another established production operator in the sector, has launched the FEED process for two new wellhead platforms to expand its South Arne complex. Maersk says expansion of its Halfdan field expansion program is progressing to plan, with a new processing platform set to start service in 2011.
Due to the slowdown in global LNG demand, Gazprom, Total, and Statoil decided to defer until 2011 final investment decisions on facilities for the Shtokman project in the Barents Sea off northernRussia. First exports of gas through a pipeline to Europe are now set for 2016, followed by the start up of the LNG scheme onshore northern Russia in 2017.
Laying was due to begin in April of the first of the 48-in. (122-cm) diameter, 1,224-km (760-mi) Nord Stream pipelines taking gas from Russian fields through the Baltic Sea to markets in Europe. Saipem's semisubmersibleCastoroSei has started its program in the Swedish Exclusive Economic Zone, 60 km (37.3 mi) off the island of Gotland. Eventually two parallel pipelines will be laid between the start-point of Vyborg, Russia, and the end-point of Lubmin, northern Germany.
Gazprom, which is providing the gas, aims to send further supplies to southern Europe via the South Stream pipeline system, including a 900-km (559-mi) stretch through deepwater in the Black Sea. Another construction program recently under way off the Russian Black Sea coast is the 159.5-km (99-mi) offshore section of the new Dzhuba-Lazarevskoye-Sochi gas pipeline. TheC-Master barge is laying the mid-depth offshore portion, with the Bigfoot 1 barge handling the shallow-water stretch.
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