Frontiers in the New Millennium

Remote, deep, and difficult, frontier foraging expanding after 2000

Dev George
Managing Editor

Where will the "new frontiers" be beyond 2,000? One thing is certain - they will be offshore. The offshore side of the industry has already superseded onshore as the source of most of the earth's hydrocarbons, and onshore prospects are in a decline. Fifty nations are now offshore producers, and another 20 nations have known offshore reserves that are essentially untouched for one reason or another.

Where, then, will the oil and gas come from once the new millennium is upon us? The technology is here or rapidly being developed to go wherever it is, and so, too, is the impetus to search the earth's distant corners, to probe the seas' deepest fathoms, to shoot some seismic and drill new prospects where few have gone before. All that is needed is a world marketplace where demand for hydrocarbons outstrips supply, and that, say most pundits, lies just beyond the dawn of the 21st Century, when a panoply of countries will be exiting the Third World and joining the ranks of energy-driven industrialized nations.

That view has not gone unnoticed. Peering over the millennial horizon, explorers of every ilk, from state oil companies and small independents to major international operators, are out there drilling for hydrocarbons or at least acquiring seismic data, despite the high cost and the inherent risks. Almost anywhere in the world where there isn't a moratorium, a ban, or a pristine environment protected by law or convention, there are explorers today.

The frontiers are thus the Gulf of Mexico's deepwater, and that of West Africa and Brazil, the Timor Gap, the Caspian Sea, and Sakhalin Island waters. They include the Malvinas/Falkland Islands, Alaska and Canada's arctic waters, Norway's and Russia's Barents Sea, as well as Norway's M re and V ring Basins, and finally the Atlantic frontier of northwestern Europe.

Present known offshore reserves are estimated at 200 billion bbl, but the vast seas have yet to reveal most of their bounty. Three oceans hold the reserves of the future: the Indian, Pacific, and Arctic Oceans.

In the Indian Ocean, the prospects look extremely good for the Mozambique Channel between Madagascar and the African mainland as well as the Madagascar Plateau south of the island; for the Seychelles waters south of Mah? Island; for India's Maldive Islands; and for the Exmouth Plateau west of Australia.

The Pacific's most promising prospects are China's East China Sea, which is just beginning to show hydrocarbons in the Pingu play; the Arafura Sea between New Guinea and northern Australia, which may hold massive gas reservoirs; and the New Zealand Plateau south of the big island.

The Arctic, certainly will be the last to be fully explored and developed, but it is believed to harbor huge reserves in many of its basins, particularly in the seas that drain Russia and the Siberian shelf - the Barents, Kara, Laptev, East Siberian, and Chukchi Seas.

US Gulf of Mexico

Exploration of the US Gulf of Mexico has nowhere to go but out and down - to the farthest reaches of US aquatory where it abuts that of Mexico. Extensive deepwater exploration and development is now underway, but farther out, in Alaminos Canyon, Keathley Canyon, and Walker Ridge, at immense depths, discoveries have been made, particularly in AC Block 25 and 26, that could reach 100 million bbl in reserves. The majors expect this to be the location of the next century's hydrocarbons. Already, Exxon, BP, Shell, and Texaco have leased large tracks within the region and are investigating others.

West Africa

West Africa is coming into its own. Already one of the world's major producing regions and site of considerable development, activity is just beginning to percolate in the deepwater reaches of Nigeria, Gabon, Angola, Congo, and Namibia, but will likely be at full throttle after the turn of the millennium.

The current rash of major discoveries only allude to the possibilities that lie ahead. Shell's Bonga and Bengo Fields and Elf's N'Kossa and Girassol - probably the largest oilfield in West Africa - indicate the direction deepwater exploration and development are going.

Future frontiers lie elsewhere in West Africa besides the deepwater, however. Prospects look good for major development of the upper Gulf of Guinea, particularly from Cote d'Ivoire to the Nigerian border, and even tiny Gambia, on the Atlantic hump of Africa, is looking as though it may have prospects to offer, now that 3D seismic technology has been able to penetrate the salt structures and reveal what lies below.

And, for the same reason, Senegal's prospects are looking brighter. So far, however, despite major interest, nothing has been found of commercial quality.

Brazil

In what is apparently an unofficial competition, Petrobras and Shell seem to be vying for the deepest offshore well, with the record alternating back and forth between the two, as they press onward and downward in their search for greater reservoirs. And it is this record-breaking search off Brazil and in the Gulf of Mexico that spotlights the frontier nature of both venues.

Brazil has only begun to explore its outer shelf and deeper aquatories, however. Petrobras is only now exploring Brazil's northeast coast, having conducted major seismic studies of the area over the past few years. In particular, it believes major reserves are to be found on the Brazilian shelf from Baia de Sao Marcos southeast to the easternmost point of the country at Rio Grande do Norte. Exploratory wells were drilled last year, and further exploratory drilling will be done in the second half of this year. Perhaps, too, as the Brazilian prospects open to private and foreign participation, these more distant frontiers may be probed sooner.

Farther south, in a true frontier region, there are the Malvinas/Falklands, long ignored and now prized by both the UK and Argentina, since it is believed the shelf surrounding the islands and to their north contains large deposits of hydrocarbons. Seismic acquisition has been underway for almost two years, and initial licensing has begun, but the environment, the substrata, and the politics between Argentina and the UK push real exploration and development of this frontier well into the next decade and beyond.

The Arctic

Russia appears to finally be moving toward real exploration and development of its arctic offshore reserves. There have been occasional drillings and a few lines of seismic shot from time to time in the past, but until now nothing much has come of it. Russia's Gazprom and Rosshelf, likely realizing their incapability of going it alone, have renewed their link with Norsk Hydro, Neste, and Conoco, rejected three years ago, and added Total, in a new scheme to jointly develop the massive Schtockmanovskoye gasfield in the Barents Sea.

Russia's Rosshelf and Gazprom have announced four licensing rounds for the Barents and Pechora Seas during the next six years. This year, the first round has offered two Barents Sea blocks off Murmansk and the Pomorskoye Block in the Pechora Sea. This year and next year, the Ledovoye Block in the Barents Sea are set to be offered, as is a block adjacent to Pomorskoye. In 1999-2000, the Shtokmanovskoye Block and a block off Novaya Zemlya are to be offered, and in 2001-02, two additional blocks in the central Barents are scheduled. The Prirazlomnoye, Ludovskoye, and several other highly prospective blocks are to be retained for domestic licensing. 3D seismic surveys are being conducted by both Sevmorneftegeofizika and Geco-Prakla.

Beyond these first forays into the Arctic, Russia has done little exploration and even less to let others participate in bringing what are believed to be large arctic reserves onstream. From the Kara to the Laptev, East Siberian, and Chukchi Seas some feasibility studies and proposed projects have been done, but little else, even though all are proported to be highly prospective. The Kara Sea has the Rusanovskaya, Leningradskaya, and Zapadno-Sharapovskaya Fields, which together could easily become one of the world's leading petroleum provinces in the 21st century. Today, however, they embroiled in bureaucratic one-upmanship and go essentially unexplored and undeveloped.

The USA and Russia have signed a memorandum of understanding for the simultaneous exploration and development of their Chukchi Sea aquatories in the Arctic Ocean northwest of Alaska, and blocks are supposed to be leased following joint efforts at assessing the region's prospectivity.

The Alaskan Beaufort Sea may attract 21st Century interest, too. Majors are beginning to look at the area again, after quite a fallow period, and one, BP, has decided to develop a major field there, the Badami Field off the eastern North Slope. The 100 million bbl oil field may spark other developments once its infrastructure is in place.

Another arctic frontier with good promise is Greenland and its Baffin Bay, Davis Strait area off its west coast. A small Canadian company, gr nArctic Energy, has been doing extensive exploration in the Nuussuaq Peninsula area, including seismic both nearshore in the fjords and bays, and on the shelf. Geological indications are that a number of important trends traverse the area, but no other exploration has been done in this iceberg alley to date.

Atlantic Europe

With the traditional North Sea fields maturing rapidly, the UK is putting considerable emphasis on its West of Shetlands aquatory, which has garnered early successes, even though there is a total lack of infrastructure and huge sea swells sweep the area. Said to hold approximately 5 billion bbl oil and little gas, the frontier region is expected to become the UK's next major province. Accordingly, some 40% of the UK's 16th licensing round lies in the area, and several significant discoveries have already occurred there, particularly BP and Amerada Hess's Foinaven and Schiehallion Fields and the recent BP-Shell find, Suilven Field.

Farther seaward and even more remote a frontier likely to see considerable activity, is the Faeroe Islands' aquatory. A department of Denmark, the Faeroes are a virtually unexplored frontier that is attracting some attention as the North Sea operators scout for new venues. A remote, deepwater region with a harsh environment, it has seen little exploration save a few exploratory wells and a 12,000 line km seismic survey done last year over most of the prospective Faroese waters by Western Geophysical. Mobil, however, is soon to do another survey in these waters.

The Faeroese need the revenue petroleum production would earn, but they have little to finance exploration. A border dispute with the UK also complicates matters, but it is expected to be settled in time for the first licensing, expected later this year. A BP discovery near the Faeroe frontier has sparking interest in the area, and a consortium of Enterprise Oil, Mobil, and Denmark's Statoil is preparing to enter the area.

South of the Faeroes, the Atlantic north and west of the Hebrides, is virginal aquatory and attracting some attention as the prospectivity of the West of Shetlands region continues to advance. New seismic has been shot and several key tranches are being studied to add to 17th Round licensing information. Digicon has done 2D, and a 3D aeromagnetic survey was done by World Geoscience. Prospecting, it is said, look very good.

Ireland has entered the frontiers competition with its Slyne, Erris, and Rockall Troughs and, farther southwest, its Porcupine Basin. The Troughs were the first Irish offering in the country's western offshore region, and Porcupine was its second. Both lie in deepwater zones ranging from 300 to 2000 meters depth. Little is known of their geology, although one Porcupine field, Connemara, with estimated 200 million bbl oil, is known but considered uncommercial. Aran, Monument, Texaco, Repsol, Statoil, Murphy, Santa Fe, and Enterprise hold leases and are just beginning to explore with tentative drillings and seismic.

Asia-Pacific

Even though there are many long established, oil and gas plays throughout the Asia-Pacific region, it has several remote and difficult locations that are likely to characterize the Asian frontier after the year 2000. Foremost among them are the eastern islands of the Indonesian archipelago. The Indonesian government is doing all it can to increase the attractiveness of these frontier zones by offering excellent terms and conditions for joint ventures with Pertamina or production sharing contracts for single operators - and, the discovery of huge gas deposits off Kalimantan and Irian Jaya is providing even further incentive to exploration. Despite the lack of infrastructure, deepwater, and difficult environmental conditions, it is entirely probably that one of the next decade's principal petroleum focuses will range from the Makassar Straits to the Molucca and Ceram Seas between Sulawesi and Irian Barat, and the Arafura Sea and Timur Gap. Already, Total, Unocal, Phillips, BHP, Arco, and others have begun exploratory seismic and drilling, and most are finding good indications of hydrocarbons.

Taking Indonesia's lead, Malaysia is also offering tempting terms to operators who will explore and develop its remote, deepwater (200 meters or more depth) prospects off Sabah and Sarawak. Mobil was the first to be awarded tracts here, Blocks SK-A, SK-B, SK-C, and SK-D, ranging in depth from 1,000 to 1,800 meters, has been acquiring seismic over the blocks, and has spudded one well, Mulu-1, in 1,185 meters of water in Block SK-A. Shell, in a PS contract with Petronas, was granted the first deepwater tract off Sabah, Block G.

The archetype of frontier itself, is Papua New Guinea's Gulf of Papua. Although considerable drilling and development have been done onshore Papua New Guinea, little exploration or development has been done until recently in the Gulf. The Pandora gasfield in PPL82, now held by Mobil, is being expanded into a healthy play that looks to Australia's Queensland as a customer for the considerable gas it will likely produce, with flowrates of 43 MMcf/d. During 1996, Mobil acquired some 2,000 km of 2D and 12,000 sq km of 3D seismic data via Geco Prakla's vessel Resolution over this and PPL152, and several new wells have been drilled. Real development and the export pipeline will probably not occur until after 2000, however.

For political and economic reasons, in addition to its remoteness and the hostility of its Okhotsk Sea aquatory, Sakhalin Island qualifies as the epitome of a petroleum industry frontier. After years of negotiation and agreements, contracts and decrees, it looks as though additional exploration and development will begin later this year or in early 1998 in one of the four consortia projects. Again, however, it is not likely that full E&P will get underway until after 2002.

There has been a hesitant move to explore North Korea's new concessions in the East Korea Bay, granted to Australia's Claremont Petroleum and its affiliate Beach Petroleum. The only other North Korean concession is held by Sweden's Taurus Exploration. Until the political hostility between the two Koreas ceases, however, very limited exploration can be expected in the area.

Other Asian frontiers garnering attention are India's Andaman Islands, which have been put on offer in the last licensing round, as well as the Palk Strait between India and Sri Lanka. The Philippines is promoting its Sulu Sea region, where new seismic has being acquired with leasing in mind. And China is putting considerable effort into its East China Sea, which has been extensively leased.

In the South Pacific, Fiji has drawn considerable attention with its offering of concessions in three licensing blocks: A, in the Bligh Bight between Viti Levu and Vanua Levu, the main islands, D, south of Vanua Levu, and C, in the southern Lau Island Group east of the Koro Sea. Likewise, Vanuatu's oil reserves, indicated by both seismic and AGSO geological evaluations, may be of a commercial level. A licensing is likely later this year. The petroleum potential, which has been compared to that of Southeast Asia, is said to be indicated around the island of Santo and Malekula.