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Norway explorers neglect North Sea, exploration activity declines to 11-year low

Infrastructure risks being shut down without fresh resources

By Mikael Holter

Petroleumworld 11 02 017

Oil explorers are neglecting their old hunting grounds in the North Sea, threatening to deepen an expected slump in Norway's output in the middle of the next decade, the country's industry regulator warned.

Norway's oil and gas production, which peaked in 2004, is already forecast to fall again after 2025 as old fields decline. But that estimate includes resources yet to be found, meaning without new discoveries it could be even lower. This year's record drilling campaign in frontier areas of Norway's Arctic yielded disappointing results. It also masked a greater threat: exploration in the North Sea, the heart of the country's offshore industry, fell to an 11-year low.

“That worries me,” Bente Nyland, the head of the Norwegian Petroleum Directorate , the regulator, said in an interview in Stavanger on Tuesday.

Successive governments have focused on the Barents Sea, stimulating exploration there to help set up a new hub in the Arctic waters thought to hold at least half Norway's remaining resources. But the region has limited infrastructure, with only one gas field and one oil field brought to production so far.

Norway's North Sea is in the opposite situation: huge deposits that have pumped oil and gas for decades are now maturing. That means it's critical to add new resources before infrastructure such as platforms and onshore processing plants are forced to shut down, Nyland said during a conference organized by LO, Norway's biggest union.

The NPD expects about 15 exploration wells to be drilled in both the North Sea and the Barents Sea this year, a presentation by Nyland showed. While that's a record for the Barents, it's the lowest level for the North Sea since 2006. The slump comes after Norway had its worst exploration results in a decade in 2015.

A case in point is Lundin Petroleum AB , one of the most active explorers off Norway in the past decade and the company behind the 2010 discovery of the Johan Sverdrup field in the North Sea, the country's biggest find since the 1980s. This year, Lundin is drilling as many as six wells in the Barents Sea as an operator and only one in the North Sea.

Nyland's worries are well-founded, especially considering the limited number of companies leading exploration efforts, Lundin Chief Executive Officer Alex Schneiter said in a phone interview Wednesday. But “2018 will be a very active exploration year for Lundin,” including in the North Sea, he said.

Nyland's concerns echo those of Norway's Petroleum and Energy Minister Terje Soviknes, who said in a recent interview he's more concerned about a drought in large discoveries than by peak oil demand . Norway's offshore industry, which has lost about 50,000 jobs since the crude-price collapse of 2014, is facing a dearth of large projects after Sverdrup and the Johan Castberg field in the Barents Sea start production in 2019 and 2022, respectively.

Statoil ASA , which staged an exploration comeback in the Barents Sea this year with five wells, didn't get the results it hoped for, CEO Eldar Saetre said at the conference on Tuesday. Nyland's warning that explorers shouldn't forget the North Sea needs to be heard, he said in an interview.

“If we continue to see a trend where we're not making bigger discoveries, we will have to search more in mature areas,” he said. “This is an important issue.”

Story by Mikael Holter from Bloomberg.

bloomberg.com 11 01 2017

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