Exploration activity in 2008 and 2009 has led to a number of discoveries in the Norwegian sector of the North Sea. (Image courtesy of IHS Inc.)

As petroleum provinces mature, it is common to see a shift from exploration to production, but the story in Norway is a little different. The Norwegian government is very pro-active in the oil and gas sector and is determined to access the full potential of the resources within its boundaries—why leave oil or gas in the ground if it can be produced, either now or by using future technologies? To this end, the Norwegian government has a target of increasing reserves in Norway by 5 Bboe in the period 2005-2015 (of which just 1.5 Bboe have been added to date).

In the late 1990s the government realized changes were needed to boost sluggish exploration levels and to encourage more companies to view Norway as a rewarding place to invest. Companies, both international and Norwegian, were expanding their portfolios in emerging basins elsewhere in the world that were more attractive than Norway for those precious exploration dollars. Something had to be done to encourage a diverse mix of companies and regular recycling of acreage to counteract this trend.

So in 1999 the licensing system on the Norwegian Continental Shelf (NCS) was changed. In addition to the regular “numbered” licensing rounds, which usually take place approximately every two years, emphasis was placed on the mature areas of the North Sea, resulting in the yearly North Sea Awards (NSA) which took place from 1999 to 2002. Following on from this, the Awards in Pre-defined Areas (APA) include acreage in the Norwegian and Barents seas in addition to the North Sea. These yearly licensing rounds in particular have proven to be very successful in attracting new companies to the NCS and in creating a constant churn of acreage. Of the 64 planned wells on the NCS in 2009, almost half are located on APA acreage.

In a statement issued on Jan. 29, 2009, the Norwegian Petroleum Directorate confirmed that the APA system was working as intended, resulting in quicker circulation of acreage, increasing exploration activity in mature areas, and bringing a more diverse mix to the companies involved on the NCS. In fact, 42% of the wells planned during 2009 will be drilled by newcomers (companies that have entered the NCS since 2000), and there will be almost double the number of operators drilling this year than in 2008.

Additionally, license area fee changes made in 2007 have increased pressure on companies to continue exploratory activity on old licenses and to relinquish areas not covered by a development plan. The government does not want to see areas lying idle when new companies with fresh ideas and lower economic thresholds may bring active exploration.

The Norwegian North Sea today
The yearly APA licensing rounds continue with the awards for 2008 being made in January 2009. Of the 34 licenses awarded, almost two-thirds cover North Sea blocks.
However, the North Sea was not included in the traditional 20th Licensing Round, awards for which were made in April 2009 (this round focused on the Norwegian and Barents seas, in particular frontier areas that could hold the potential for large discoveries).

Last year was a record year for exploratory wells on the NCS. A total of 56 wells were spudded throughout the year, and 57% of them were located in the North Sea. Of the 56 spuds, 25 resulted in new discoveries, and half of these were in the North Sea (see map). This proves that despite the area being considered mature, it is still attractive for exploration drilling, and it still produces results.

The 2008 North Sea discoveries have combined estimated reserves of 170-270 MMbbl of oil and 390-530 Bcf of gas—not earth-shattering volumes perhaps, but significant nonetheless. The story improves over the first half of 2009.Atotal of 64 exploratory wells are planned this year, with almost three-quarters of these due to be drilled in the North Sea. Indeed, by the end of June 2009, 34 wells had spudded, and 74% were in the North Sea.

As of early July 2009, 13 North Sea discoveries have been announced (see map), representing 72% of all 2009 finds to date, and with potential reserves of up to 700 MMboe, a significant improvement on 2008.

StatoilHydro has had success with Cannon (non-commercial gas condensate), Corvus (gas), Curran (3 to 15 MMbbl of oil), Fulla (60 to 105 MMboe of gas condensate), Katla (60 to 80 MMboe of oil and gas), Ragnarrock Graben (100 to 350 Bcf of gas condensate and oil), Titan (5 to 12 MMbbl of oil), and Vigdis Northeast (25 MMbbl of oil).

ExxonMobil made a minor oil discovery at Eitri and encountered gas condensate at Freke.

Talisman’s Grevling oil discovery could be large enough, at 40 to 130 MMbbl, to warrant a standalone development, although the Gyda TR3 discovery has been deemed non-commercial.

The most recent discovery to date in 2009 was made by Wintershall at Grosbeak where estimated oil and gas reserves are 35 to 190 MMboe.

Looking ahead
An area of focus this year is Luno (see map). This significant oil discovery was made by Lundin Petroleum in 2007 on APA 2004 acreage previously held and relinquished by Statoil. The 16/1-8 discovery, with recoverable reserves of up to 190 MMboe, was the largest in the Norwegian North Sea in the past decade. An appraisal well was completed in January 2009 confirming the presence of the Jurassic reservoir to the northeast. Reserves have not yet been recalculated, but Lundin believes the field is commercial.

In 2009 Lundin plans to drill three further wells in the Luno area, one on the Luno extension immediately south of the mapped discovery area, one on the Luno High prospect in adjacent license PL 359, and the third on the Luno 3 prospect in neighboring PL 410. Total potential reserves for all three prospects (not including Luno itself) are put at more than 600 MMboe.

In 2008 three new fields came onstream in the North Sea —Alvheim, Vilje, and Volve — adding approximately 28 MMbbl of oil and 11 Bcf of gas to Norwegian production volumes for the year.

Development plans for Froy and Trym were submitted in 2008 and are still under consideration. If approved, these two North Sea fields will produce approximately 56 MMbbl of oil and 120 Bcf of gas over their lifetimes. In 2009 the government is expecting plans to be submitted for at least six new North Sea developments (one of these, Oselvar with reserves of 52 MMboe, had been submitted and approved by June), and three North Sea fields should start producing (one of which—Rev, with reserves of 166 Bcf of gas and 5 MMbbl of condensate—came onstream in January).

So, activity continues, enthusiasm is high, and discoveries abound — the Norwegian North Sea is certainly not dead and buried yet.