Offshore asset trading throughout northwest Europe is attracting new investors, particularly in the mature basins. But Gaz de France's emergence as an exploration and production power has been more rapid than most, and more ambitious. While others have focused efforts in individual sectors, Gaz de France (GdF) has picked up field interests across the North Sea, and also a stake in an innovative Barents Sea development project.
The company's rationale is to secure long-term gas deliveries to its customers in France and elsewhere in Europe following EU measures to open the market to competition. France has historically imported most of its natural gas from Norway, Russia, Algeria, and The Netherlands, lately adding some LNG shipments from Qatar and Nigeria. Now Gaz de France wants to broaden its options by producing 15% of its own gas, and the geographically close North Sea is a logical source.
The process started in 1998 in the UK sector, when the company picked up interests in the producing Murdoch Field and the Elgin-Franklin gas condensate development, the latter through a joint venture with operator Elf. In April the following year, Lasmo agreed to sell its entire southern gas basin portfolio, with the exception of the Markham production complex, to GDF Britain for £90 million. That package included interests in the producing Boulton and Caister Carboniferous gas fields plus numerous other undeveloped fields, 22.5% of the Esmond gas transportation system which landfalls in Bacton, and additional equity in the Caister Murdoch pipeline system which sends gas from these and other fields to a processing plant onshore in Theddlethorpe.
The value of that purchase was heightened this March, when operator Conoco announced a new 80 Bcf discovery in a location between Murdoch and Caister. The well was drilled by the jackup Ensco 80 in 40 meters of water, and encountered 225 meters gross and 52 meters net pay within the Carboniferous Westphalian formation. Conoco and its partners (including GdF) are now evaluating possibilities for including the find with the planned five-field CMS III development, where production is scheduled to start late in 2002.
According to the Ocean Oil Weekly Report, these accumulations represent gross reserves of over 500 Bcf, and they will likely be tied back to the Murdoch MD platform, with three new pipelines installed totalling 45 km in length. Two of the candidate fields are thought to be Errol and McAdam in block 44-17-A. GdF paid Fr 500 million for ARCO and Ranger Oil's 35% share in this block, including development-related costs.
Other potential developments in GdF's southern sector package are Cavendish and Chiswick (close to Markham), which recently underwent appraisal drilling. In the central sector, GdF also owns 5% of the long-distance SEAL trunkline which feeds gas from the Shearwater and Elgin/Franklin fields through to mainland Europe via the Bacton-Zeebrugge Interconnector.
Gaz de France had a tougher time securing a foothold in the Norwegian sector. Two attempts to buy its way into production projects were rebuffed by the government, but a third was approved by the new administration last October. One transaction brought it Statoil's 20% stake in Norsk Hydro's Njord Field. Statoil viewed Njord as being outside its core area on the Norwegian continental shelf.
The company also bought 12% of operator Statoil's 35% stake in the Snohvit gasfield in the Barents Sea. Snohvit has estimated reserves of 210 Bcm of gas and 115 million bbl of condensate - a development plan has been formulated involving construction of northern Europe's first LNG plant, in northern Norway.
Shortly before the Statoil deals, GdF became an offshore operator for the first time when it acquired 100% of TransCanada International Netherlands, plus 38.57% of Noordgastransport BV, which owns the 318 km NGT offshore trunkline in the Dutch sector. As a result, GdF - via its affiliate company ProNed - became a 25-49% participant in seven Dutch blocks and three fields under development, equivalent to gas production capacity of 800 MMcm/year. GdF also now operates the NGT line, which extends from the central region of the Dutch continental shelf to a treatment terminal in Uithuizen, near Groningen.
Two recent discoveries which could be exploited through NGT are in ProNed-operated block K/12. Since drilling was initiated by the original operator Placid in 1971, eight commercial discoveries have been made, according to Wood Mackenzie, with estimated recoverable reserves in the block of 820 Bcf. Early this year, a new exploratory well, K/12-13, was drilled in the south-eastern part of the block, 4 km west of the K/12-D platform and 7 km southwest of the K/12-C processing platform. That well found reserves estimated at around 200 Bcf within a Rotliegendes structure. ProNed says plans for K-12 are currently under appraisal.
ProNed followed up K/12-13 with another successful exploratory well, K/12-14, drilled by the jackup Noble Pete van Ede, which will probably also be developed through existing facilities.
GdF says that its production totals will rise in all three North Sea sectors this year. In combination, they currently generate 5% of the company's European gas sales. The company aims to triple that figure by 2003, and to that end will consider further opportunities around Europe.
One could be Algeria, where the company has been discussing joint exploration and development with Sonatrach. GdF also has a 12% stake in the new Medgaz study, led by Sonatrach and Cepsa, to lay a new offshore gas pipeline linking Algeria and Spain. This could be 200 km long, in water depths up to 2,000 meters, with a capacity of 8-10 Bcm/yr.