Status and challenges on the NCS

Resource-report-2011

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Introduction

This year marks the 45th anniversary of the arrival of Ocean Traveler in Norway and the spudding of the first well on the NCS, and the 40th anniversary of the start to oil production from the Ekofisk field in the North Sea. The petroleum industry has experienced economic fluctuations and varying prices for oil and natural gas since these beginnings. Over the period as a whole, however, it has been characterised by growth and rising production.

This expansion has meant that the petroleum sector ranks today as Norway’s largest industry measured by value creation, government revenues and export value. It currently contributes about a fifth of total value creation and a quarter of government revenues. Oil and gas account for half of Norway’s total export value. According to Statistics Norway, more than 200 000 people are employed directly or indirectly in activities on the NCS. Value creation by the Norwegian oil and gas industry since its start totals NOK 9 000 billion in 2011 money.

Production on the NCS remains high. Norway was the world’s seventh largest exporter of oil and the second biggest of gas in 2010. However, oil output has declined from its 2001 peak and is expected to drop further. Gas production is still rising, but that has not prevented overall NCS output from falling since 2004. See figure 1.1.

 

Figure 1.1 Historical petroleum production

Figure 1.1 Historical petroleum production


The resource potential on the NCS remains high. This is underlined by the fact that several large discoveries were made during the first half of 2011 in both the Barents and the Norwegian Seas, including 7720/8-1 (“Skrugard”) and 16/2-8 (“Aldous Major South”). Resources in new discoveries could exceed production in 2011 for the first time since 1997.

In the NPD’s view, remaining resources could lay the basis for substantial production and value creation over many decades to come. Opportunities for new discoveries and the potential for improved recovery from existing fields will be particularly important in a long-term perspective.

Technology and expertise have been important in realising the assets on the NCS, and will continue to be so. That relates to exploration, development, optimum recovery from producing fields and developing resources in the far north. A continued focus on research, development and the adoption of new technology will accordingly be crucial for future value creation.

 

Resource account

The NPD’s resource account provides an overview of expected total recoverable petroleum resources, including those still to be discovered. It is based on the NPD’s resource classification and builds on data reported from the operator companies, the NPD’s own assessments of fields and discoveries, and its estimate of undiscovered resources. See the box on resource classification.

 

Resource classification

Resource classification


The resource classification covers all estimated petroleum resources, both discovered and undiscovered. Petroleum volumes are classified by their maturity.

Resources are divided into the principal classes of historical production, reserves, contingent resources and undiscovered resources. Reserves relate to remaining recoverable petroleum resources in deposits which the licensees have decided to develop. Contingent resources are discovered petroleum volumes still not covered by a development decision. Undiscovered resources are volumes considered to be recoverable but not yet proven by drilling. Whether the estimated resources actually exist is uncertain. The various main classes are divided into sub-classes depending on the maturity of the various projects.

 

The resource account covers all parts of the NCS except those areas where the available data are inadequate, which involves the continental shelf around Jan Mayen and Barents Sea East. Other areas not currently open for petroleum activity are included in the account.

Production up to 31 December 2010 totalled 5.5 billion standard cubic metres of oil equivalent (scm oe), or roughly 40 per cent of expected recoverable reserves. Total recoverable reserves are estimated to lie within an uncertainty range (P10 and P90) of  10-16 billion scm oe, with an expected value of 13 billion scm oe. See figure 1.2.

 

Figure 1.2 Distribution of total recoverable petroleum resources at 31 December 2010, including the uncertainty range

Figure 1.2 Distribution of total recoverable petroleum resources at 31 December 2010, including the uncertainty range 

 

The NPD’s estimate of total recoverable resources changes over time. Resources are matured through several phases (see the text box on resource classification and table 1.1). New knowledge of geology and reservoir conditions as well as further discoveries change assessments of the resource base. Today’s picture differs significantly from the one which prevailed 15 years ago. See figure 1.3.

 

Class Cate-gory FIELDS Oil
mill smc
Gas
bill smc
NGL
mill tonnes
Cond
mill
smc
Total 
o.e.
mill
smc
Change 
from 2009
mill
smc
Sold and delivered 0 Sold and delivered 3626 1547 133 95 5521 233
Reserves 1 In production 664 1638 90 34 2506 -98
  2 Approved for development 102 95 12 1 221 -15
  3* Approved by licensees 62 309 13 0 396 67
    Total reserves 827 2043 115 35 3123 -46
Contingent resources 4 In planning phase 178 175 13 3 382 111
  5 Development probable, but
not clarified
227 107 13 1 360 -19
  7 F Non-evaluated discoveries in connection
with fields
5 12 1 2 21 0
  7A Possible future measures for improved recovery 140 70     210 -20
    Total contingent resources in fields 550 364 28 6 972 72
    DISCOVERIES            
  4 In planning
phase
113 139 5 6 272 5
  5 Development probable, but
not clarified
50 144 5 6 210 -36
  7 F New discoveries, not evaluated 92 73 2 4 166 -37
    Total contingent resources in discoveries 255 356 11 16 648 -68
Undiscovered resources 8
and
9
Prospect possibilities
and unmapped resources
1200 1255   115 2570 -710
    Total
resources
6458 5564 287 268 12834 -519
    Total
remaining resources
2832 4017 154 173 7314 -752

* includes discoveries in RC 3F

Table 1.1 Resource account at 31 December 2010 

 

Figure 1.3 The NPD’s estimate of expected recoverable petroleum resources, 1992-2010

Figure 1.3 The NPD’s estimate of expected recoverable petroleum resources, 1992-2010

 

Future assessments of the resource base will also change in relation to the present evaluation, since estimates incorporate a substantial degree of uncertainty. Depending on whether the figure in the lower or upper part of the uncertainty range in figure 1.2 (10-16 billion scm oe) is applied, production to date totals about 50 or 30 per cent respectively of total recoverable resources.

 

Unconventional oil and gas resources

Unconventional resources is a collective term for oil and gas deposits which cannot be recovered commercially with conventional production wells and technology, normally because flow to the wells would be very low.

Little attention has been paid so far to unconventional petroleum resources on the NCS, since producing them has been noncommercial to date. As world energy demand grows and oil prices rise, mapping and assessing the recovery of these resources could also be necessary.

No estimates of unconventional petroleum resources on the NCS have been made so far by the NPD. However, it is likely that such resources are substantial but that profitable recovery lies some way off (see chapter 2).

 

Future oil and gas production

The authorities produce forecasts for future petroleum production on the NCS. These prognoses build on oil company reporting and the NPD’s resource estimate. See the box on production forecasts. The current production forecast up to 2030 is shown in figure 1.4.

 

Production forecasts


Projecting petroleum production a long way into the future is a demanding exercise. Production forecasts are naturally subject to great uncertainty, which increases with the length of time they cover. The estimate for production from undiscovered resources is particularly uncertain. From the end of this decade, such resources are expected to form a growing and eventually substantial share of total production.

Scenarios can provide a supplementary way to present future petroleum production in order to illustrate the substantial uncertainty inherent in the estimate of remaining recoverable resources. Such scenarios were developed in the NPD’s resource report for 2007. Four different future courses for oil and gas production on the NCS up to 2046 were presented, with both downsides and possible upsides identified. White Paper no 28 (2010-2011) An industry for the future – concerning petroleum activities presents a possible course for production on the NCS up to 2040. The

White Paper emphasises the opportunities on the NCS, and outlines a plan for taking advantage of these. As a result, a production profile has been developed which incorporates some of the upside as well as opportunities available in the areas not covered by the resource estimate. The resource estimate which forms the basis for the production profile lies within the uncertainty range in the NPD’s estimate remaining recoverable resources, which is 4.8-10.6 billion scm oe.

 

Figure 1.4 Historical petroleum production and forecast production to 2030

Figure 1.4 Historical petroleum production and forecast production to 2030

 

Petroleum output is expected to remain at roughly the same level for the next 10 years, despite a gradual decline in production from the large oil fields. Measures to improve recovery and bring discoveries on stream contribute to maintaining output. After 2020, production from undiscovered resources will account for a growing proportion of the forecast figure.

Uncertainty in the forecasts for the next few years relates primarily to the production of reserves – how much each field can produce, how regularly the fields deliver, how efficiently new wells are phased in, and other projects on the fields. It is also uncertain when discoveries will be developed and brought on stream, and how much they will produce.

Uncertainty increases over the long term because undiscovered resources account for a gradually increasing share of expected output. This uncertainty is greatest in areas still not opened for petroleum activity. In the longer term, it is also uncertain what contribution could be made by technological development in realising the resource base on the NCS.

 

Challenges for producing fields

Based on today’s cessation plans, more than half the oil originally in place will remain in the reservoirs. Figure 1.5 shows how much oil is produced and sold by the biggest oil-producing fields, the size of their remaining reserves, and how much is expected to be left in the ground when they close down.

 

Figure 1.5 Distribution of produced oil, remaining oil reserves and oil resources which will remain in the ground if the fields are closed down in accordance with currently approved plans

Figure 1.5 Distribution of produced oil, remaining oil reserves and oil resources which will remain in the ground if the fields are closed down in accordance with currently approved plans

 

The potential for increasing recovery factors on today’s fields is substantial. Continued efforts to achieve a high recovery factor are accordingly important. Injection, drilling, and maintenance of wells are important for producing existing reserves and could also contribute to raising recovery factors – and thereby reserves – for the fields. Developing and qualifying advanced injection methods and new technology through field trials could further improve recovery. In the NPD’s view, a commitment to measures which can improve the recovery of mobile oil with current techniques is important. So is a continued commitment to developing and implementing methods which could recover currently immobile oil. Close follow-up and facilitation by the authorities have historically proved useful in such processes, and will also play an important role in the future. The NPD also sees that achieving annual production ambitions is demanding on a number of fields, and that fewer wells than planned are being drilled. Well targets will contain ever decreasing volumes in the time to come, and many will not be profitable with today’s costs in relation to oil prices. Drilling and maintenance expenditure per well in relation to oil prices therefore represents a challenge. Good cost control and paying greater attention to new drilling methods and technology could make it possible to produce a larger proportion of the resource base. Success here could limit the decline in oil production from the old fields, which may still have a long producing life. Exploiting the potential in the fields will be reviewed in chapter 5.


Discoveries

Estimated resources for discoveries not sanctioned for development at 31 December 2010 totalled 650 million scm oe. That amounts to five per cent of total expected recoverable resources on the NCS and nine per cent of remaining recoverable resources. The NPD’s analysis shows that commercial discoveries will be developed, but that this may often take time. Important reasons for this are uncertainty over the resource base, discovery size, lack of spare processing capacity and absence of infrastructure. In addition come commercial assessments and strategic considerations for the companies. The scope of resources in discoveries and challenges related to commerciality are reviewed in chapter 4.

 

Undiscovered resources

Exploration activity on the NCS has been high in recent years, with extensive seismic surveying and a large number of exploration wells (see chapter 3). Maintaining a high level of exploration activity is also necessary in the years to come in order to clarify the potential of the undiscovered resources and to make new discoveries which can be developed.

A third of the estimated remaining recoverable resources have yet to be proven. Estimates for undiscovered resources build on play analysis. Plays are defined on the basis of geological knowledge. The level of uncertainty in the estimates is high, particularly in areas where little is known about the sub-surface (see chapter 2).

The North Sea is the best-mapped area of the NCS. Many wells have been drilled, and the geology is well known. Uncertainty in the estimates for undiscovered resources in the North Sea is accordingly lower than for the other sea areas. Although well explored, with many large discoveries, the North Sea still has a substantial potential. This was recently documented through the 16/2-6 (“Avaldsnes”) and 16-/8 (“Aldous Major South”) discovery wells. At 31 December 2010, resource estimates for the North Sea gave a 90 per cent probability that it contains 470 to 1 305 million scm in undiscovered recoverable oil equivalent, with an expected value of 845 million scm oe. See figure 1.6.

 

 Figure 1.6 Distribution of total recoverable petroleum resources in the North Sea at 31 December 2010, including the uncertainty range for undiscovered resources

Figure 1.6 Distribution of total recoverable petroleum resources in the North Sea at 31 December 2010, including the uncertainty range for undiscovered resources

 

The knowledge base in the Norwegian Sea varies from good to limited. Resource estimates for these waters give a 90 per cent probability that they contain 260 to 1 580 million scm in undiscovered recoverable oil equivalent, with an expected value of 780 million scm oe. See figure 1.7. Disappointing exploration results in deepwater areas of the Norwegian Sea in recent years have prompted the NPD to reduce its expectations of the oil and gas resources which might exist in this area.

 

Figure 1.7 Distribution of total recoverable petroleum resources in the Norwegian Sea at 31 December 2010, including the uncertainty range for undiscovered resources

Figure 1.7 Distribution of total recoverable petroleum resources in the Norwegian Sea at 31 December 2010, including the uncertainty range for undiscovered resources

 

Large areas with little data and few or no exploration wells exist in the Barents Sea. The level of uncertainty is accordingly high. Based on current knowledge, it is estimated with 90 per cent certainty that the area contains 175 to 2 460 scm in undiscovered recoverable oil equivalent, with an expected value of 945 million scm oe. See figure 1.8.

 

Figure 1.8 Distribution of total recoverable petroleum resources in the Barents Sea at 31 December 2010, including the uncertainty range for undiscovered resources

Figure 1.8 Distribution of total recoverable petroleum resources in the Barents Sea at 31 December 2010, including the uncertainty range for undiscovered resources

 

In addition come possible undiscovered resources around Jan Mayen and in the new Norwegian area of Barents Sea East. These areas are not included in today’s resource estimate.

 

Curbing greenhouse gas emissions

Concern for the environment has always been an integral part of Norway’s petroleum activity and government regulation of the industry. An extensive set of instruments takes account of the environment in every phase of the business.

Emissions to the air by the petroleum sector derive primarily from burning natural gas in turbines to produce energy, flaring natural gas for safety purposes and burning diesel oil.

The petroleum sector pays Norway’s carbon tax and is also subject to the European collaboration on emission allowances. Many measures to cut carbon emissions have been prompted by the carbon tax. Reduced flaring and heat recovery are examples of emission-reducing measures which have had a big effect.

Environment-friendly development solutions and supplying power from shore to installations have the biggest potential for reducing emissions from offshore facilities viewed in isolation.

Several new fields are to be developed with power from shore over the next few years. Ormen Lange, Troll A and Gjøa already receive electricity in this way. Valhall in the southern North Sea, on stream since 1982, is now being converted to power from shore. This approach has also been adopted for Goliat in the Barents Sea. Even if several fields are powered from shore, overall emissions from the sector are unlikely to decline in the next few years. That is because a number of developments will come on stream, while the expected production profile for existing fields indicates that few will be closed down.

 

Technology and talent

The NCS has a reputation as a technological laboratory for the oil industry. Continuing to develop this position will also be crucial for the level of future production.

Oil companies and suppliers have been honing their skills ever since 1966 on the challenges presented by the North Sea and later also by the Norwegian and Barents Seas. This has resulted in the development of technologies which have contributed to huge value creation from the NCS and which have also become important exports to other petroleum provinces. Examples include crossing the Norwegian Trench with the Statpipe line in 1985, the installation of a floating platform on Snorre in 1992, horizontal wells on Troll, waterflooding on Ekofisk, subsea installations and a production ship on Åsgard, multiphase transport and remote operation for Snøhvit and Ormen Lange, and subsea separation on Tordis. See figure 1.9.

 

Figure 1.9 Technological developments

Figure 1.9 Technological developments

 

Over almost 45 years of technological progress, Norway’s petroleum activity has gradually moved from south to north, from shallow to deep water, and from large fixed installations to subsea developments and remotely controlled solutions. The direction and pace have been determined by sequential access to the resources, the challenges presented by discoveries, and a size of discovery sufficient to finance new technology.

Large fields can carry the financial burden represented by technological development and innovation. They are big enough to reap substantial advantages from the results, while other fields also benefit from the technological progress made. With few exceptions, discoveries made over the past 10 years are less able to carry technological development than Ormen Lange, Åsgard and Troll, for example. Small discoveries call to a greater extent for integrated solutions and for the companies to invest in research and development (R&D) across different production licences.

A number of the big fields are moreover in a late phase, which means that their planning horizon and remaining resources could make it difficult to achieve large-scale pilot trials, not least because these could involve the risk of lost output.

The NPD is worried both about the level of funding devoted to petroleum research and about the growing tendency for many technology projects and pilots to be delayed or cancelled. A continued focus on research and development and the implementation of new technology will be crucial for future value creation on the NCS. Access to human resources and talent is also a critical factor. It is accordingly very important for young people to see that the industry has a long-term perspective and is worth making a commitment to.

 

Exploration and new areas

Production from the NCS depends in the long term on new discoveries being made which are capable of being developed. Based on current expectations for the resource base, future production and exploration activity, almost 40 per cent of petroleum output on the NCS in 2030 will derive from discoveries which have yet to be made. The number and size of finds will be crucial for the size of Norway’s future production.

Discoveries need to be generally larger than has been the case over the past 10 years if the object is to maintain the level of production over a long period. Although substantial finds have recently been made in both mature and frontier areas, the opportunities to make large discoveries are probably greater in parts of the unopened areas than in those already opened.

Extensive unopened areas still exist on the NCS. See figure 1.10. No new areas have been opened to petroleum activities on the NCS since 1994. Political decisions are required on opening further areas. The areas which have not been opened present different challenges, and the time scale from a possible opening process to exploration, discoveries, development and production will vary. The government resolved last autumn that an impact assessment would be conducted for the waters off Jan Mayen with a view to future petroleum activity. The NPD accordingly initiated seismic surveying in the summer of 2011 as part of this impact assessment. In White Paper no 28 (2010-2011) An industry for the future – concerning petroleum activities, the government announced that it would initiate a number of measures to prepare for the opening of new areas. Against that background, the NPD also started seismic surveying in Norway’s new sea area at the southern end of Barents Sea East.

 

Figure 1.10 Status of petroleum activities on the NCS by area

Figure 1.10 Status of petroleum activities on the NCS by area

Figure 1.10 Status of petroleum activities on the NCS by area

 


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The resource report 2011
Main page Preface 1 Uoppdagede ressurser Leting Fra funn til felt Muligheter og utfordringer for felt i drift

09.11.2011