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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and…

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Big Oil Refuses To Give Up On The Barents Sea

Arctic

Encouraged by recently opened areas and potentially huge yet-to-be-discovered resources, oil companies launched a record exploration drilling campaign in Norway’s Barents Sea this year. But as the summer and the drilling progressed, one dry well after another spelled the end of a disappointing 2017 campaign in which just two viable oil discoveries were made. The most promising wildcat yielded no oil.

Still, Norway’s Statoil and Aker BP, along with the Norwegian unit of Sweden’s Lundin Petroleum, are not giving up on exploration in the Barents Sea and promise to return for the 2018 drilling campaign.

“Access to new exploration areas will be crucial to the future of the Norwegian continental shelf,” says Statoil, which sees a significant drop in production and activity after 2025 without new exploration acreage and discoveries.  

Following a continual decline between 2001 and 2013, Norway’s crude oil production rose last year for the third year running, but according to the Norwegian Petroleum Directorate (NPD), oil production this year would be nearly half the volume from the peak in 2000-2001.

In April this year, the NPD raised the stakes for more exploration in the Barents Sea, saying that the undiscovered oil and gas resources in the Barents Sea were twice as large as previously thought. The directorate also said that it expected a record exploration campaign in the Barents Sea this year, with 15 wells to be drilled, two more than the previous record year in 2014. Related: The Embarrassing Problem Holding Back Tesla’s Model 3 Production

Two months before that, Lundin Petroleum had already struck oil and gas in the Barents Sea with the Filicudi discovery, whose gross resource estimate is between 35 and 100 million barrels of oil equivalents.  

As the summer drilling campaign approached, Norway’s Ministry of Petroleum and Energy offered in June a record number of 102 blocks up for exploration in the 24th licensing round—9 blocks of which are in the Norwegian Sea, and 93 in the Barents Sea—despite environmentalists’ concern over drilling in the Arctic.  

Statoil explored five licenses in the Barents Sea this summer. Of those five exploration wells, the oil giant only found between 25 and 50 million barrels of recoverable oil equivalents at the Kayak well, which could add volumes to the Johan Castberg development.

The Korpfjell exploration well—the first well drilled in the Norwegian section of a formerly disputed area between Norway and Russia, and the northernmost wildcat well drilled on the Norwegian shelf—was a disappointment compared to expectations that it could contain more than 250 million boe, or even 1 billion boe.

Lundin and Italy’s Eni also stumbled upon dry wildcat wells this summer in what turned out to be a really bad campaign.

But the oil companies are not losing hope and will return next year, determined to prove that the Barents Sea holds much more oil resources.

“We are coming back next year and will drill at five prospects in the Barents Sea,” Dan Tuppen, VP of Exploration for the Barents Sea and Norwegian Sea at Statoil, told the Barents Observer just after the oil major said it found no oil at Korpfjell.

Of the five wells planned for drilling next year, one will be at the Korpfjell license, Tuppen said.

Aker BP and Lundin also plan to proceed with exploration in the Barents Sea.

“Lundin has long-term ambitions in the Barents Sea,” Lundin Norway’s exploration manager Halvor Jahre told Bloomberg in an email.

Aker BP plans to drill six to eight exploration wells offshore Norway in 2018, including four in the Barents Sea, chief executive Karl Johnny Hersvik told Reuters in an interview last month.

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“The hype of the Barents Sea was too high... It’s not game over, but it’s worthwhile to cool it a bit,” Hersvik told Reuters.

According to Wood Mackenzie analyst Neivan Boroujerdi, the Barents Sea is “still a very long-term game.” 

“We’re not ready to write its obituary just yet,” Boroujerdi told Bloomberg.

Despite a disappointing campaign this year, Norway’s oil industry is committed to pursuing Barents Sea prospects to increase production and profits.

By Tsvetana Paraskova for Oilprice.com

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