Exploration activity and results

02.07.2013

The level of exploration activity has been high over the past five years, with more than 40 exploration wells spudded per annum and extensive acquisition of seismic data. This development primarily reflects changes to Norwegian exploration policy at the start of the present century and the optimism generated by new discoveries and high oil prices. A marked increase in exploration activity has also been witnessed internationally in this period.

Many discoveries have resulted from the large number of wildcats. The most and biggest finds are being made in the North and Barents Seas.

 

Acreage

Norway’s overall offshore area covers 2 040 000 square kilometres, almost 6.5 times greater than its mainland size. About half the area comprises sedimentary rocks which could contain petroleum. See figure 2.1.

 

Area status for the NCS in June 2013

Figure 2.1 Area status for the NCS in June 2013.

 

With certain exceptions, the North and Norwegian Seas and the southern Barents Sea have been opened for petroleum activities. The opened areas cover 523 800 sq.km. Those which remain unopened are Barents Sea South-East and North, areas close to the coast in the Norwegian Sea, the area around Jan Mayen and most of the Skagerrak.

Environmental impact assessments are conducted pursuant to the Petroleum Activities Act before the Storting resolves to open new areas. As part of an opening process, the NPD acquires geological and geophysical data on behalf of the government and produces an estimate of the resource potential of the area.

Opening processes have been initiated by the government for Barents Sea South-East and the offshore areas around Jan Mayen. See chapters 6 and chapter 7. The question of opening Barents Sea South- East has been submitted to the Storting. Should it approve the proposal, this will be the first new area of the NCS to be opened to petroleum activities since 1994.

Oil companies primarily gain access to acreage by applying for production licences in numbered licensing rounds and in the awards in predefined areas (APA) scheme. In addition, the companies are able to buy and swop interests in production licences.

The whole North Sea was put on offer in the very first licensing round on the NCS, in 1965. This was the largest round to date in terms of area. The second largest numbered round was the 13th in 1991. See figure 2.2. This presents the acreage on offer and awarded in the numbered rounds, the North Sea awards (NSA − introduced in 1999 and the forerunner of the APA scheme) and the APA rounds.

 

Acreage on offer and awarded on the NCS at 15 March 2013

Figure 2.2 Acreage on offer and awarded on the
NCS at 15 March 2013.

 

Over the past 15 years, the amount of acreage put on offer has steadily increased. The number of licence awards and acreage awarded were at record levels in 2004-12, with an annual average of some 50 new licence awards (Figure 2.3) and 23 000 sq.km in new licensed area (figure 2.2). The oil companies have displayed great interest in applying for acreage on offer, which shows that the NCS remains an attractive petroleum province.

As more acreage becomes available, the amount which has been relinquished increases too. This must also be seen in relation to such government measures as changes to the area fee and the introduction of work programmes which put the industry under greater pressure than before to work actively with awarded acreage.

 

Number of licence awards over the past 15 years by licensing round

Figure 2.3 Number of licence awards over the
past 15 years by licensing round.

 

 

Recycling acreage – the Utsira High South example

Most of the acreage licensed under the APA scheme has been awarded and relinquished earlier. When new companies get the chance to explore relinquished acreage, it may turn out that they manage to mature substantial petroleum resources. A number of examples of this exist, with the exploration history of Utsira High South in a class of its own (see the fact box).

Recycling acreage – Utsira High South

The story of Utsira High South embraces blocks 16/1, 2, 3, 4, 5 and 6. Exploration has been pursued there since the first licensing round. The two production licences initially awarded in this area were PLs 001 and 007. Esso was sole licensee for 00l, while 007 was awarded to a group of eight licensees with Elf as the operator. Great activity, many players and a highly interesting exploration history have characterised the area since the first wildcats in 1967. Everything from small finds to very large discoveries have been made. The level of activity remains high, and licensees are still hunting for more resources in the area.

All acreage in the blocks originally awarded in PLs 001 and 007 on this part of the Utsira High has been relinquished. It was not until 1984 that one of the relinquished blocks, 16/4, was awarded anew in the eighth licensing round.

The first wildcat found traces of petroleum, but 18 wells had to be drilled on this part of the Utsira High before a commercial discovery was made with Edvard Grieg in 2007. A number of finds have followed, and three fields are now to be developed in the area, almost 50 years since the first awards.

Edvard Grieg, the first of these projects, is due to come on stream in 2015. This field lies in PL 338, awarded in the 2004 APA round, and oil was proven by discovery well 16/1-8. Lundin is operator for the development, with OMV and Wintershall as its partners.

The licensees for 16/1-9 Ivar Aasen are planning production from late 2016. With Det Norske as operator, they discovered oil with well 16/1-9 in 2008. This well lies in PL 001B, awarded in 1999.

Ranked as the largest discovery on the NCS since the 1980s, 16/2-6 Johan Sverdrup was proven in 2010 in PL 501 with Lundin as operator. The latter was awarded the acreage in the 2008 APA round. PL 501 covers parts of blocks 16/2, 3, 5 and 6, which were originally awarded in the first licensing round. They were later awarded in PL 265, which relinquished block 16/3 and parts of 16/2. The 16/2-6 Johan Sverdrup discovery also extends into two production licences operated by Statoil. Roughly 25 appraisal wells have been drilled, and more are scheduled. Plans now call for 16/2-6 Johan Sverdrup to be developed with Statoil as operator for the planning phase.

In other words, despite many wildcats and much recycling of acreage, a massive discovery was waiting to be made. The story of the oldest exploration areas on the NCS is set to continue for many years to come.

 

Exploration wells

From the start in 1966 until April 2013, almost 1 430 exploration wells have been drilled on the NCS. Such wells passed their first peak in the 1980s, at almost 50 per annum. See figure 2.4. During the 1990s, the annual count varied from 20 to nearly 50. A fairly steady decline set in from the late 1990s, until a nadir of only 12 exploration wells was reached in 2005. Since then, the number has risen sharply. Although the North Sea is regarded as a mature area, it remains the part of the NCS where most wells are drilled.

 

Number of exploration wells spudded, 1966-2012

Figure 2.4 Number of exploration wells spudded,
1966-2012.

 

The rise in the number of exploration wells since 2005 is primarily a result of high oil prices and changes to exploration policy around 2000. See the fact box.

 

Exploration wells

“Exploration well” is a collective term for wildcats and appraisal wells.

A wildcat is the first well drilled in a geological structure (prospect).

An appraisal well is drilled to determine the extent and size of a discovery.

 

Mobile rigs on the NCS also increased in number from 2005, as figure 2.5 shows. This overview has been prepared by the NPD on the basis of data from the industry. An expansion in rig capacity is expected both globally and on the NCS in coming years.

 

Development in the number of mobile rigs on the NCS

Figure 2.5 Development in the number of mobile
rigs on the NCS.

 

A number of the rigs which have arrived on the NCS in recent years have been specially designed for operations there. Although many of the new units are chartered to drill on new fields, capacity for exploration drilling will probably increase.

Well over half of all exploration wells on the NCS have been drilled in production licences awarded in the first eight licensing rounds. Roughly 40 per cent have been drilled in licences awarded in rounds one-four. See figure 2.6.

 

The proportion of completed exploration wells and wildcats by licensing round

Figure 2.6 The proportion of completed exploration
wells and wildcats by licensing round. (Drilling in
supplementary awards is allocated to the round
when the original licence was awarded.)

 

Even over the past five years, a substantial number of exploration wells have been drilled in licences awarded in rounds one-four. See figure 2.7.

 

Completed exploration wells per year by various licensing rounds

Figure 2.7 Completed exploration wells per year
by various licensing rounds.

 

About 12 per cent of exploration wells and 13 per cent of wildcats have been drilled in licences awarded in APA rounds, including the North Sea awards. The majority of exploration wells during recent years have been drilled in APA licences, which indicates that increased availability of acreage contributes to a larger number of exploration wells.

 

 

Changes in operating parameters

Exploration on the NCS was low around 2000, particularly in mature areas. That contributed to low resource growth. To boost such activity, the government implemented changes in the industry’s operating parameters. Provision was made in 2000 to admit new companies, and the prequalification of operators and licensees was introduced. This aimed to make it simpler for a new company to secure access to acreage, either through licence awards or through buying/ swopping licence interests.

The policy on awarding licences in mature areas was amended in 1999 through the establishment of the NSA scheme, which developed in 2003 into the APA. Active work in mature areas is important for the government, and awards have been made annually since the system was introduced.

An amendment to the Petroleum Taxation Act adopted by the Storting in 2004 gave companies with a tax loss the right to annual refunding of the tax value (78 per cent) of exploration costs with effect from 1 January 2005. Alternatively, such losses can be carried forward as a tax deduction in later years with an interest supplement. This policy aims to put new companies on an equal footing in the exploration phase with established players who already have taxable earnings which allow them to deduct exploration costs in the same year they are incurred.


Exploration costs

Exploration costs comprise the cost of seismic data acquisition (general surveys), exploration wells, field evaluation and administration. Figure 2.8 shows developments in exploration costs broken down by these cost components.

 

Developments in exploration costs and number of wells spudded, 1998-2012

Figure 2.8 Developments in exploration costs and
number of wells spudded, 1998-2012.

 

Exploration costs develop largely in line with trends for the number of wells drilled. This is hardly surprising, since drilling represents the biggest single factor in total exploration costs. While the number of exploration wells drilled rose, costs per exploration well also increased substantially during the period (figure 2.9).

 

Developments in exploration costs per well spudded, past 15 years

Figure 2.9 Developments in exploration costs
per well spudded, past 15 years.

 

Drilling costs can be broken down roughly between rig costs and other expenses. Rig costs are determined by the day rate and the number of drilling days. A sharp increase in rig rates has occurred worldwide in recent years, which helps to explain the development in drilling costs per well.

However, rig rates remain higher in Norway than in other petroleum provinces such as the UK continental shelf. According to the Reiten commission, the most important reason for this is higher Norwegian operating costs. (Chaired by Eivind Reiten, the commission was appointed by the Ministry of Petroleum and Energy and submitted its report on rig and drilling capacity on the NCS in August 2012.)

 

Discoveries

The high level of exploration activity in recent years has resulted in a series of discoveries. Three of the past five years accounted for the largest-ever number of finds on the NCS. See figure 2.10.

 

Discovery wells per offshore area per annum, 1967-2012

Figure 2.10 Discovery wells per offshore area
per annum, 1967-2012.

 

A large proportion of these discoveries have been made in acreage awarded in the four first licensing rounds. See Figure 2.11. Nothing has so far been found in production licences awarded in the 21st round or the APA 2011 and 2012 rounds, since it takes time for drilling decisions to be taken and wells spudded.

 

Discovery wells per round

Figure 2.11 Discovery wells per round.

 

Finding rate rising

The average finding rate (finding success rate) on the NCS has been rising in line with growing knowledge of its geology and with technological advances. Figure 2.12 presents trends for average technical and commercial finding success since 1967. Calculation of technical finding success includes all discovery wells, while commercial finding success excludes discoveries in resource category 6 (see fact box). Technical and commercial finding rates have averaged about 55 and 40 per cent respectively over the past 15 years.

 

Completed wildcats, discovery wells and average finding rate, excluding and including resource category 6 (see box), 1967-2012

Figure 2.12 Completed wildcats, discovery wells and
average finding rate, excluding and including resource
category 6 (see box), 1967-2012.

 

Resource category 6

Not all discoveries will be developed. Some have been classified by the NPD as discoveries unlikely to be produced. These are ones which are not expected to prove commercial, even in the long term. This category (resource category 6) contains petroleum resources where substantial changes in technology, costs and petroleum prices are required if they are to be brought into commercial production, and where such changes are thought to be unlikely.

Resource category 6 currently contains 108 discoveries, whose resources are not included in the estimate of total recoverable resources on the NCS.

Few examples exist of discoveries placed in this category which have subsequently been developed. However, new discoveries in the vicinity, technological advances and significant changes in the price and cost picture could change conditions for commercial development.

 

Low resource growth and small discoveries

Although the finding rate is high and many discoveries are being made, resource growth over the past 15 years is substantially smaller than in the two previous 15-year periods. See figure 2.13.

 

Recoverable resources in discoveries proven in 15-year periods by discovery size, 1967-2012

Figure 2.13 Recoverable resources in discoveries
proven in 15-year periods by discovery size, 1967-2012.

 

However, the past five years have been positive with several large discoveries, including 16/2-6 Johan Sverdrup in 2010. See figure 2.14.

 

Recoverable resources in discoveries proven in five-year periods by discovery size, 1998-2012

Figure 2.14 Recoverable resources in discoveries
proven in five-year periods by discovery size,
1998-2012.

 

 

Resource growth and production

On average, the amount of oil and gas discovered annually on the NCS exceeded annual production during the first 30 years. See figure 2.15. This reflected low output and large discoveries.

 

Proven recoverable resources in discoveries (resource growth), production and average discovery size, 1967-2012, by 15-year periods

Figure 2.15 Proven recoverable resources in discoveries
(resource growth), production and average discovery
size, 1967-2012, by 15-year periods.

 

Discoveries over the past 15 years have been substantially smaller than the volume produced, reflecting high levels of output and a smaller average discovery size. However, a more detailed analysis of the latest 15-year period shows that the picture is more nuanced. See figure 2.16.

 

Proven recoverable resources in discoveries (resource growth), production and average discovery size, 1998-2012, by five-year periods

Figure 2.16 Proven recoverable resources in discoveries
(resource growth), production and average discovery
size, 1998-2012, by five-year periods.

 

Over the past five-year period, resource growth has been almost on a par with production. The main reason is 16/2-6 Johan Sverdrup, which was discovered in 2010.

 

Status and development features in the various NCS areas

 

North Sea – the old are oldest

The North Sea is regarded as a mature region in petroleum terms after almost 50 years of activity. Its exploration history extends right back to 1965, and some 615 wildcats have been drilled so far.

Exploration activity remains high in the North Sea, with many discoveries. While these are generally small, several large finds have been made over the past five years. They include 16/2-6 Johan Sverdrup on the Utsira High (fact box, page 13). See figure 2.17.

 

Resources in North Sea discoveries by discovery size, 1998- 2012

Figure 2.17 Resources in North Sea discoveries
by discovery size, 1998- 2012.

 

About 100 new production licences have been awarded in the North Sea during 2011-13 through the APA rounds, which will help to maintain exploration activity in coming years.

 

Norwegian Sea – opportunities and challenges

While parts of the Norwegian Sea are regarded as mature, others – particularly in deep water – remain frontier areas in relative terms. The Norwegian Sea was opened to exploration in 1980, and about 200 wildcats have been drilled since then.

Although interest in exploration has experienced a considerable revival in the North and Barents Seas following several large discoveries, exploration results in the Norwegian Sea have been modest in recent years. After an upturn in 2008-10, interest in the Norwegian Sea has been more limited outside the areas close to existing infrastructure. This has contributed to a decline in exploration activity outside the mature parts of the Norwegian Sea during recent years. From 2011 to May 2013, 19 wildcats were completed in the Norwegian Sea and yielded nine discoveries. The finding rate is high, but proven volumes in these discoveries are moderate to small. Only one of the 19 wildcats was drilled outside the existing APA area, in deep water in the Vøring Basin.

No deepwater exploration wells are planned in the Norwegian Sea during 2013, with exploration drilling confined to the APA area. The planned wells will primarily be targeted on the Upper Triassic to Lower Jurassic play in which most Norwegian Sea resources have been proven.

In the deepwater areas, particular work is being done to prepare for seismic surveying beneath the basalt layers adjacent to the Møre and Vøring High and in the westernmost part of the Møre and Vøring Basin.

The 21st licensing round resulted in a number of new licences around the Aasta Hansteen gas discovery, whose forthcoming development will be important for proving more gas in the area in coming years. Fourteen Norwegian Sea blocks are on offer in the 22nd round, all in the Vøring Basin.

After several years of limited exploration activity in the Møre Basin in the southern Norwegian Sea, a number of new licences have been awarded in the south of the basin around the Ormen Lange field and in the basalt region farthest to the west. These licences were awarded in the 20th and 21st licensing rounds and in the 2010 APA round. Evaluations under way in a number of them will result in drill or drop decisions within one to three years.

 

Resources in discoveries in the Norwegian Sea by discovery size, 1998-2012

Figure 2.18 Resources in discoveries in the Norwegian
Sea by discovery size, 1998-2012.



Barents Sea – new optimism

After many years of disappointment, optimism has returned to the Barents Sea, primarily because of three discoveries made in 2011- 12 – the Johan Castberg oil find (7220/8-1 Skrugard and 7220/7-1 Havis) and the 7225/3-1 (Norvarg) gas discovery. See figure 2.19.

 

Resources in discoveries in the Barents Sea by discovery size, 1998-2012

Figure 2.19 Resources in discoveries in the
Barents Sea by discovery size, 1998-2012.

 

Good exploration results over the past two years have generated great interest in Barents Sea drilling. The NPD expects some 10-14 wells in the Barents Sea during 2013.

The Hoop area is the northernmost part of the NCS where acreage has been awarded, and oil discoveries are possible. A number of wells are due to be drilled there over the next few years.

 

Exploration history of the Barents Sea

Petroleum activities have been pursued in the Barents Sea since the fifth licensing round in 1980. See the figure below. Roughly 100 exploration wells have been drilled, of which about 80 are wildcats. The first exploration well was drilled in 1980 and the first discovery – 7120/8-1 (Askeladd) – followed in 1981. More than 30 discoveries have been made in the Barents Sea. Some are not expected to be commercial and are grouped in resource category 6.

Although oil operations have been pursued in the Barents Sea for more than 30 years, only one field has come on stream – Snøhvit, which comprises eight gas discoveries. The Goliat oil field is also under development.

Optimism was high in the early 1980s, when several gas discoveries were made in the Hammerfest Basin. A number of wells drilled outside that basin after 1986 were either dry or contained only small gas resources. Interest in exploring the area waned as a result, and not a single well was drilled between 1994 and 2000. In 1997, the government launched a Barents Sea project to promote and increase exploration activity. Special measures and terms resulted in the offer of both conventional production licences and large areas for seismic surveying. Operator Norsk Agip (now Eni) found both oil and gas in PL 229 during 2000, and this discovery was named Goliat.

The government suspended activities in 2001 to await the impact assessment for year-round petroleum activities off Lofoten and in the Barents Sea (ULB). In December 2003, the government resolved to permit a resumption of petroleum operations in the southern Barents Sea. The companies showed some interest, particularly because of Goliat.

Interest in the blocks which embrace the Skrugard structure was low in the 19th round, and this acreage was not awarded. New three-dimensional seismic data acquired in connection with the 20th round showed direct hydrocarbon indicators more clearly, particularly “flat spots”. A double flat spot identified on the Skrugard structure was interpreted to mean that it probably contained both oil and gas. Combined with a positive result from electromagnetic (EM) surveys, this attracted several companies.

Johan Castberg (7220/8-1 Skrugard and 7220/7-1 Havis) was discovered in 2011. Gas and oil were proven in Jurassic rocks. As expected, the double flat spot seen on the seismic map proved to represent the gas-oil and oil-water contacts. The industry is working to find explanations for why the petroleum system functions in this area. Large parts of the Barents Sea have been subject to uplift and erosion, with many of the strata eroded away so that the petroleum has leaked out. The gas leakage is clearly visible in the seismic data, including above the Skrugard structure, but has probably acted there as a form of safety valve. Because the gas leaks out, it does not expand in the reservoir and drive out the oil. In addition, the source rock lies at a favourable depth for also generating oil and gas today. This means that the traps could be dynamically refilled with petroleum to compensate for the leakage – not unlike the petroleum systems in the North Sea.

 

Exploration history of the Barents Sea