An impressive 20 development projects are currently under way on the Norwegian Shelf, and 13 exploration wells in the first half of 2018 have yielded 6 discoveries. Production has been somewhat lower in the first six months of the year as compared with the same period last year. 

Production

Total petroleum production from the Norwegian Shelf at the end of the first half of 2018 is about 114.9 million standard cubic metres (Sm3) of oil equivalents (o.e.). Of this, around 43.2 million Sm3 o.e. are oil and around 10.2 million Sm3 o.e. are NGL and condensate.

Approximately 61.5 million Sm3 o.e. of gas has been sold, which is slightly higher than in the comparable period last year, and is in line with the NPD’s expectations.

The total volume is 4.4 million Sm3 o.e. lower than in the same period in 2017.

There are a number of reasons why production is lower than last year, and lower than the NPD’s expectations. Some of this is due to technical problems on certain fields. A somewhat colder than normal winter also entailed reduced production.

Maintaining production at a stable high level requires a significant effort from all parts of the industry. A total of 86 new development wells have been drilled so far this year, about the same number as at the same time in 2017.

The Norwegian Petroleum Directorate wants to ensure that we have an active industry that explores every opportunity to create the greatest possible value from the oil and gas deposits on the Norwegian Shelf. It is therefore important that the companies maintain a high level of activity to increase recovery from producing fields.

Development

Activity on the Norwegian Continental Shelf is very high. The 20 development projects that are currently under way represent considerable diversity with new installations, minor discoveries that exploit existing infrastructure and major projects for improved recovery from mature fields.

In addition to the ongoing development projects, the authorities have received two new applications for development and operation so far this year. In May, Wintershall submitted an application for Nova, where a tie-back to the Gjøa installation is planned. On 3 July, Equinor submitted an application for development and operation for Phase 3 of Troll, which entails producing the gas cap in Troll Vest. In the third quarter, we also expect a PDO for Johan Sverdrup, Phase 2. All of these fields are located in the North Sea.

The authorities approved seven applications for development and operation during the first half of 2018. These are Skogul, Yme, Valhall flank west, Ærfugl, Fenja, Johan Castberg and the Snorre expansion project.

These projects represent investments of around NOK 100 billion and a total expected value of about NOK 165 billion. This value creation presumes that production will continue for several decades to come, and the investments show that the companies have a long-term commitment on the Norwegian Shelf. The authorities also approved PDO exemption applications for deposits in the Gullfaks Sør area.

“We are seeing a record-breaking number of projects in the implementation phase, with more projects currently being planned. We find it particularly gratifying that several of the projects aim to increase recovery from mature fields; for example Valhall, Snorre and Njord. These are large and significant developments that will ensure that we recover more profitable oil and gas from the subsurface,” says Ingrid Sølvberg.

She also points out the importance of developing smaller discoveries:

“There is a lot of talk about the major discoveries that are being developed with new infrastructure, such as Johan Castberg and Johan Sverdrup. These are extremely important and profitable projects. At the same time, another important factor is good exploitation of available capacity in the already well-developed infrastructure on the Norwegian Shelf. Our focus is on ensuring that the companies identify solutions for minor discoveries which include good utilisation of the existing infrastructure. Many of these smaller discoveries are very profitable, both for the companies and for our society.”

“At the same time, we would like to see more coordination activities, where the companies look at larger areas as one, and find joint solutions for developing new discoveries, combined with maximum recovery from existing fields,” says Sølvberg.

Exploration

Exploration activity on the Norwegian Shelf is high. The Norwegian Petroleum Directorate expects that 40-50 exploration wells will be drilled in 2018, compared with 36 in 2016 and 2017.

“It is positive that we see an increase in exploration activity. It is particularly important that more exploration wells are now being drilled in the North Sea and the Norwegian Sea, where additional resources must be identified and recovered while the infrastructure is still operational,” says Exploration director Torgeir Stordal.

There has been great interest in new exploration acreage in recent licensing rounds, which is due in part to new insight based on better seismic and well results that have led to new exploration concepts. Other important factors are access to infrastructure and lower costs.

“However, if production is to be maintained at a high level, there must be larger discoveries than what has been the average over the last ten years. The possibility of making large discoveries is greatest in areas that have not been explored much,” says Stordal.

Results from exploration wells in the first six months

In the first six months of this year, 13 exploration wells have been completed, along with 10 wildcat wells and 3 appraisal wells. Six discoveries have been made; three in the North Sea, two in the Norwegian Sea and one in the Barents Sea.

In the North Sea, oil was discovered in injectite sands in Aker BP’s wildcat well 24/9-12 S south of the Alvheim field. The discovery was delineated by well 24/9-12 A, and preliminary estimates place the size between 5 and 10 million standard cubic metres (Sm3) of recoverable oil.

Oil was proven in Spirit’s wildcat well 35/9-14 northwest of the Gjøa field in the North Sea. The volumes were small, but a relatively untested exploration concept with a stratigraphic trap was proven. The preliminary resource estimate is between 0.3 and 1 million Sm3 of recoverable oil.

Equinor found oil in well 16/1-29 S north of the Ivar Aasen field. Preliminary estimates place the size of the discovery between 2.5 and 5.5 million Sm3 of recoverable oil. The well also delineated the Verdandi discovery from 2003 in Paleogene sandstones.

An appraisal well was also drilled on the Luno II discovery, well 16/4-11. The results from this well have entailed that the volume estimate for oil has increased by 1-3 million Sm3 to between 5 and 13 million Sm3 of recoverable oil in addition to between 1 and 3 billion Sm3 of recoverable gas.

In the Norwegian Sea, OMV proved gas and condensate northwest of the Morvin field in wildcat well 6506/11-10. The discovery was made in two different reservoir units, and the preliminary estimate is between 6 and 39 million Sm3 of recoverable o.e. in total.

In wildcat well 6604/5-1, drilled by Wintershall southwest of the Aasta Hansteen field, a gas discovery was made with an estimated size of between 7 and 19 billion Sm3 of recoverable gas and between 1 and 3 million Sm3 of recoverable condensate.

In the Barents Sea, Aker BP found gas in wildcat well 7221/12-1. Preliminary volume estimates are between 2 and 3.5 billion Sm3 of recoverable gas. Initial results from gas samples indicate that the gas may be in the gas-hydrate phase. The licensees will attempt to clarify this through further analysis.

Planned exploration wells in the second half of 2018

Between 30 and 35 exploration wells are planned in the second half of the year, and drilling was in progress on 6 wells at the end of June. In 7220/11-5 S, Lundin will test the production properties in carbonates in order to perform further evaluations with a view towards developing the Alta discovery. Spirit is drilling an appraisal well on the Fogelberg discovery in the Norwegian Sea (the result was announced on 5 July). Four wells are also in progress in the North Sea (35/12-6 A, 34/5-2 S, 16/1-28 S and 15/3-11).

The total number of exploration wells for 2018 would appear to be around 30 in the North Sea, while there will probably be between 8 and 10 both in the Norwegian Sea and in the Barents Sea.

Awards in predefined areas (APA) and numbered licensing rounds

The industry has exhibited significant interest in the most recent licensing rounds.

In mid-January 2018, 34 companies received offers for a total of 75 new production licences in APA 2017. 39 companies applied for participating interests. Of the 75 production licences, 45 are in the North Sea, 22 in the Norwegian Sea and 8 in the Barents Sea. 22 of the production licences are additional acreage for existing production licences.

APA 2018 was announced in May, and the deadline for applications is 4 September 2018. Since APA 2017, the pre-defined areas have been expanded by 47 blocks in the Norwegian Sea and 56 blocks in the Barents Sea. Awards are expected during the first quarter of 2019.

In June 2018, 11 companies were offered 12 new production licences in the 24th licensing round. Three of the offered production licences are located in the Norwegian Sea and nine in the Barents Sea. Two of these are additional acreage for existing production licences.

Resource Report

The Resource Report for exploration was published and presented on 21 June 2018. It shows that significant remaining resources on the Norwegian Shelf continue to provide considerable opportunities both in mature and more frontier areas. Calculations show that exploration activity is profitable in all sea areas, and that it has added significant value for society. Even very small discoveries can be profitable when they are linked to existing infrastructure.

A great diversity of players creates competition and different exploration concepts, which promotes efficiency and value creation. Although the number of players has decreased somewhat in recent years, there is still substantial diversity in the exploration phase. Through a combination of experienced and active large and medium-sized companies, pure exploration companies and new businesses both in exploration and production, the stage is set for continued efficient exploration of the resource potential on the Norwegian Shelf.

Increased knowledge, more and better data, new work methods and new technology open up new exploration opportunities and can yield more profitable discoveries. It is important that the industry maintains a high level of exploration activity.

Subsea minerals

In mid-June, the Government presented a proposed new Act relating to mineral activity on the Continental Shelf (the Subsea Minerals Act). The NPD has previously collected information on relevant types of data for mapping minerals on the seabed, and has conducted chemical analyses from a large volume of manganese crusts.

This is important background information when the NPD is now conducting acquisition missions in the deep sea area during the summer and autumn. A collaborative mission with the University of Bergen is focusing on mapping manganese crusts, and a mission under the NPD’s own direction will chart the seabed in areas with sulphide deposits.

“Growth in the demand for renewable energy sources such as solar, hydropower and wind power increases the need for a number of minerals, including minerals that contain elements in the category of rare earth elements. These are necessary components in the production of e.g. windmills, solar panels and electric vehicles,” says Torgeir Stordal.

Resource mapping

One of the NPD’s tasks is to maintain an overview over the petroleum resources on the entire Norwegian Continental Shelf. Therefore, the NPD works tirelessly to map potential petroleum resources both in open areas and areas that have not yet been opened so as to ensure a good basis of data for future decisions.

“The NPD’s updated estimate for undiscovered resources on the Norwegian Shelf is 4000 million standard cubic metres of oil equivalents. This can provide a foundation for oil and gas production for many decades to come,” says Exploration Director Torgeir Stordal.

The NPD expects that more than 60 per cent of the oil and gas that has not yet been discovered will be found in the Barents Sea. The rest is approximately equally distributed between the North Sea and the Norwegian Sea.

In the spring of 2018, a study was initiated to map, define and assess the value of prospects around existing infrastructure, in an effort to identify potential time-critical resources.

Since 1973, the NPD has regularly collected geophysical and geological data in order to increase the level of knowledge regarding petroleum potential and to complete the data coverage for unopened areas. In 2017, the NPD acquired 2D seismic on the Gardarbank High to improve data coverage. The work to process this data is ongoing, and the plan is to complete this during the autumn of 2018. In the spring of 2018, the NPD entered into a collaboration with the University of Tromsø/CAGE for acquisition of seismic in a limited area in the eastern parts of the Barents Sea north.

Prequalification of players on the Norwegian Shelf

In the first half of 2018, prequalification assessments were conducted for two companies. Tyr Exploration AS and Mime Petroleum AS were prequalified as licensees.

The authorities are currently processing applications from nine companies that are seeking prequalification either as licensee or operator (op) on the Norwegian Shelf. This applies to the following companies:

• JAPEX
• NCS E&P
• RN Nordic Oil (op)
• Edge Petroleum
• Antares Norge
• Source Energy
• Chrysaor
• Dyas B.V
• Forties Petroleum (op)

Full-scale carbon capture and storage (CCS)

As part of the work on a pilot facility for capture and storage of CO2, the authorities invited companies on 5 July to apply for permits to utilise subsea reservoirs for injection and storage of CO2 (exploitation permit). The duration of an exploitation permit is stipulated at the time of award, and presumes that the subsea reservoir is put to use through development and storage.

In a similar manner as for the award of production licences, the NPD will evaluate the geo-technical work and provide advice to the Ministry of Petroleum and Energy (MPE) prior to the award.

The Norwegian Petroleum Directorate has previously mapped potential CO2 storage sites on the Norwegian Shelf.