STAVANGER, Norway—Statoil is planning to sink about $250 million into its ongoing exploration drilling campaign in the frontier Barents Sea over the next two years, including its northernmost wildcat yet.

Tim Dodson, the company’s global exploration chief, also forecast at the Offshore Northern Seas (ONS) conference and exhibition that up to three standalone projects could come to fruition in the Barents. That includes plans for an FPSO vessel on its Johan Castberg discovery as well as OMV’s Wisting discovery and one other find not yet made.

“We see the potential for two to three new standalone developments in the Barents Sea,” Dodson said. “The next few years will tell if we’re right or not.”

An investment decision on the Johan Castberg development, which is well underway, could be made in 2017, he said.

Also on Statoil’s radar is the Wisting discovery in the Hoop Area and the southeast Barents, where “we will over the next two or three years test some of the last remaining large structures on the Norwegian Continental Shelf [NCS],” Dodson continued.

“The testing of those licenses awarded in the 23rd round will be crucial to determining the potential of the Barents Sea and the NCS.”

Statoil will drill at least five exploration wells in 2017, with Dodson estimating their cost at about $25 million per well—making them the cheapest offshore exploration wells the company will drill globally next year, he said.

He also agreed that total exploration drilling spend for both 2017 and 2018 in the Barents could be extrapolated accordingly.

“We aim to test the potential of the [Southeast] Barents, to prove up additional resources in the Hoop Area around the Wisting discovery and to strengthen our core position in the western part of the Barents Sea in the vicinity of Johan Castberg,” he added.

“In any new petroleum province the biggest discoveries are typically made fairly early on in the exploration of those provinces. So that really underlines the importance of opening up new areas like the Barents Sea that have that kind of potential. The structures are clearly there; the reservoir is there,” Dodson said. “But do they contain oil and gas, and how much would there be?”

Looking Ahead

Jez Averty, head of exploration on the NCS for Statoil, gave more detail.

“We have worked systematically on developing an exploration portfolio for testing good and independent prospects in 2017 and 2018. For 2017, we see promising prospects in different parts of the Barents Sea,” Averty said.

“For example, we want to explore the Blåmann prospect in the Goliat area, Koigen Central in PL718 on Stappen High and the Korpfjell prospect in PL859 that was awarded in the 23rd licensing round.”

Korpfjell would be Norway’s northernmost well, a title currently held by the Wisting discovery well. In addition to the exploration well on Blåmann, which was awarded to Statoil in January, Statoil and well operator Eni have also agreed to drill a new exploration well in PL229 (Goliat) next year.

A rig that is suitable for operation in the Barents is already on contract, and the company is working to get approval from partners and authorities for the 2017 exploration campaign that includes between five and seven wells.

In addition, a separate campaign is being planned for 2018. Averty pointed out that the company has been careful to distance the wells sufficiently far apart so that a failure in one will not damage the prospectivity of others.

Keeping Costs Down

Statoil has also been busy strengthening its position in the area through several transactions with other companies. In recent months it has entered or increased its share in five licenses in the Norwegian part of the Barents Sea by a number of agreements with Point Resources, DEA, OMV and ConocoPhillips.

“Through these agreements we are strongly increasing our presence in the Hoop area,” Averty said. “We are fortifying our position around Johan Castberg, and we see new opportunities in the southwestern part of the Barents Sea.”

He also flagged up the company’s work in reducing costs by developing new technology and improving drilling efficiency. This has been further aided by the global fall in rig rates.

Dodson said of the planned wells: “These can be tested in a very cost-effective manner. Drilling efficiency has improved dramatically in the last few years at Statoil. In our last exploration campaign in the Barents Sea, we made seven discoveries out of the 12 wells we drilled. But also, more importantly, we saved NOK 1 billion [US$150 million] compared to earlier years due to efficiency gains, and that equates to seven additional exploration wells.”

He also rubbished claims that the cost of exploration drilling in the Barents would make any discoveries uneconomic. “It’s just not true,” he said, giving the US$25 million per-well figure.

Dodson also highlighted Statoil’s work in reducing its development breakeven costs, such as on Johan Castberg, where the figure has fallen from about $80 per barrel (bbl) to below $25/bbl.

He also pointed out details such as ice being surprisingly rare in these areas of the Barents, while the wind and waves were comparable to the North Sea norm “where we have operated in a sustainable manner for 50 years.”

Norway Dominates

Overall, Statoil will drill about 20 exploration wells in Norway and the U.K. next year, but Norway remains by far the most dominant target area with 17. A total of 11 wells will be drilled in the Norwegian and Barents Seas, with the others in the mature Norwegian North Sea.

Drilling is currently underway near the producing Njord Field. From here, a rig will move to drill the Cape Vulture prospect, which was awarded to Statoil in January. After that a rig will move to drill the Blåmann probe, another that will be drilled within 12 months of being awarded to Statoil.

The other wells planned for 2017 in the Barents are the Kayak and the Gemini North prospects, the latter being near the Wisting discovery.

—Mark Thomas