By Judy Maksoud
Interest grows in the Mediterranean
While offshore oil production rose slightly last year, gas production saw a marked increase. A number of current development projects are targeting gas. Though a couple of large fields are being developed as tiebacks to existing producers in the North Sea, the focus in the future could be on smaller fields.
Small fields that may not be attractive targets for some of the majors could be profitable to independents. British Energy Minister Brian Wilson has encouraged greater involvement from small independents in the North Sea, where keeping a low cost base allows them to turn a profit where larger operators cannot.
Mærsk's ultra-harsh environment jackup will operate in the North Sea.
Despite what the industry thinks it knows about this area, recent discoveries have shown that Northwest Europe still holds a few surprises. And in the Mediterranean, recent rumblings indicate that sizable reserves could surface soon.
With so many frontiers across the globe revealing world-class reserves, the UK North Sea has begun to pale in comparison. But the region is far from dead. Most new field development will be financially viable through the use of the extensive infrastructure already in place in the region. Three new oilfields, Madoes, Mirren, and Maclure, containing 60 MMbbl of oil and 2.8 bcf of gas, will be developed as satellites to existing North Sea fields.
In January, ExxonMobil announced the beginning of natural gas production from the Skene Field, a project that is expected to produce 180 MMcf/d of gas and holds a total of 95 MMboe. Skene is a satellite field that is tied back to ExxonMobil's Beryl Alpha platform. Gas from Skene will be exported from Beryl through the Scottish Area Gas Evacuation pipeline to St. Fergus.
Kerr-McGee has flagged nearly 40% of its E&P budget for 2002, $310 million, for projects in the North Sea. The Tullich Field, scheduled to come online this year, is one of the primary recipients, along with Skene and Leadon. Tullich, containing estimated reserves of 40 MMBOE, is being developed as a four-well, horizontal subsea tieback to the company-operated Gryphon A facility.
Another of the region's new programs, PanCanadian's Buzzard Field, has recoverable reserves of 400 MMbbl in the southern and central sectors of the field, and a significant area of the field has not been evaluated. The company announced an additional well on the discovery would be drilled through late May.
According to a Wood Mackenzie report, the 23 fields offshore the UK that received development approval last year contain a total of about 393 MMbbl oil and 1.44 tcf of gas compared to the 302 MMbbl of oil and 1.82 tcf of gas contained in the nine new fields identified in the previous year.
Last August, Ramco Energy began drilling its first well in the Seven Heads Field, 200 miles southwest of Kinsale, Ireland. In November, Northern Petroleum confirmed that well 48/24-5A in Seven Heads tested 13.7 MMcf/d of gas. Reports indicated potential reserves of 350 bcf of gas, but the final word is not yet in.
In January 2002, Burlington Resources awarded a $78.3 million engineering contract in its Rivers Fields natural gas venture in the Irish Sea to Allseas UK, a subsidiary of Allseas Group, and Genesis Oil and Gas Consultants Ltd., part of Technip-Coflexip. Burlington announced it would invest $263.5 million in the project, which will extract gas from the 350-400 bcf fields. A platform will be installed in late 2002, followed by a pipeline in 2003 and first gas in 2004.
In February 2000, the Faeroese Ministry of Petroleum received 22 license applications from 17 oil companies in the first licensing round on the Faeroe Shelf. In August, the ministry awarded seven offshore exploration licenses to 12 oil companies, and in mid-November, Amerada Hess found the first significant hydrocarbon discovery in the area. This find followed unsuccessful wells drilled by Statoil and a consortium of BP Royal Dutch/Shell. The discovery offers encouragement for the future of the oil and gas industry in the area.
West of Shetlands
GlobalSantaFe's Magellan jackup drilling in the UK North Sea.
Existing developments show that there is potential in the West of Shetlands area, particularly in deepwater. Petroleum Geo-Services SA (PGS) is helping to identify the most likely prospects with a large 3D-4C survey that will image the Clair Field. BP, which contracted the survey, hopes the use of new seafloor technology will enhance imaging of major faults and isolate potential reservoirs. Exploration and development West of Shetlands will pose challenges and will likely attract only companies big enough to handle the expense and willing to test the limits of technology to chase reserves.
A number of fields could soon be moving into development in the Dutch sector of the North Sea. In March, Statoil announced that two new oil fields, Nini and Cecilie, are planned to be tied back to the Siri platform on the Danish continental shelf. Recoverable reserves in Nini and Cecilie are estimated at 65 MMbbl of oil. Dansk Olie og Naturgas (DONG) submitted development plans to the Danish Energy Agency to develop the fields using two unmanned wellhead platforms that will be tied back to the Siri platform with pipelines. The final go-ahead for field development should be granted by Danish authorities in mid-summer. Production is to begin in mid-2003.
Increased development of the Halfdan Field will raise gas production. In early 2002, field operator Mærsk initiated a third phase of development on Halfdan, adding a new process module for the existing production platform and a bridge-linked accommodation platform.
Norway's Norwegian Sea attracted bids from 13 oil companies in the country's 17th licensing round. PGS has scheduled a full Northwest Europe season of 4C acquisition, including a 3D-4C survey of the Statfjord and Statfjord East fields in Norway's North Sea sector for Statoil. Multi-component seafloor technology using a high-density survey design is being applied to producing fields to better characterize the reservoirs, with emphasis on enhanced fault definition.
Norsk Hydro is planning two deepwater wells offshore Norway this year, one of which could be the deepest ever drilled offshore Norway. The first well was to spud in March on the Ormen Lange Field.
Norway has cautiously pursued offshore development and as a result, has lined up some major development projects in the coming few years.
In February, Statoil announced that two wells drilled in the Gullfaks Field hit gas and cond-ensate with the potential for commercial development. The appraisal well, drilled form an existing platform, was brought on stream. No finds had been made previously in what appeared to be Cretaceous rock, a fact that could lead to new opportunities. The Norwegian North Sea holds a few more surprises for the oil and gas industry.
Older fields across Northwest Europe are seeing development with the application of technology that increases produced reserves.
Nederlandse Aardolie Maatschappij (NAM) of the Netherlands plans to spend $1 billion to redevelop the Groningen gas field, part of which lies offshore. Groningen is the country's primary gas source, producing 5.3 bcf/d. Domestic demand is growing, which has left the field unable to supply needed supplies. ExxonMobil and Royal Dutch/Shell, who formed the NAM joint venture, plan to raise the pressure of the field to increase production.
Wood Mackenzie's latest review of The Netherlands shows solid development, with ten new offshore gas projects in progress, with combined reserves of 2 tcf. An additional 12 could move forward in the next two years, adding another 1.5 tcf. Solid infrastructure will facilitate development.
Western Russia (Barents Sea/Black Sea)
In February, Russian state-owned Rosneft announced plans to revive a project to explore and develop the offshore Prirazlomnoye oil field in the Barents Sea, which holds an estimated 600 MMbbl of oil. The company plans to invest $200 million. Russia's Rubin and Ukraine's Korall construction bureaus are working with Brown & Root to finish project engineering to construct the foundation of the first platform on the field. Rosneft's goal is to have the platform ready by 2004.
Yukos and TotalFinaElf have formed a joint venture (JV) to exploit petroleum in the Shatski region of the Black Sea. TotalFinaElf is currently producing 12,000 b/d of oil in the Kharyaga oil field in the Timan Petchora region in Russia. The goal of the JV is to raise production to 30,000 b/d. The JV plans to extract oil from locations that are in the Russian territorial waters at 4,950-8,250 ft water depth. This will be the first exploration drilling in this area of the Black Sea. The first phase of work is a new seismic survey that will generate data to be evaluated alongside data previously acquired by Yukos. Russian authorities have not yet approved this project.
Other news in European Russia is the construction of the pipeline, which will connect Russia to Turkey. Nearly 100 km of pipe has already been laid on the seabed at 2,000 m water depth. Construction work on the second unit of the subsea section of the pipeline began in the Black Sea. The pipeline will have annual throughput of 16 bcm. Testing has begun on the first unit of the Blue Stream pipeline. Russian gas supplies to Turkey are scheduled to begin later this year.
Spain, Portugal, Italy, and Malta
In mid-February, BG Group received government approval for its application for seven offshore exploration licenses offshore Spain. The licenses, located in the Ebro Delta 90 km northeast of Valencia, cover a 6,500-sq-km area (equivalent to 30 North Sea blocks). BG Group will hold 100% equity in the licenses.
Securing these licenses expands BG Groups Mediterranean presence and opens up opportunities for gas development. The company plans to spend $28 million carrying out an exploration program over the next three years. A 3D seismic survey covering 1,500 sq km is scheduled to begin this summer, and exploration drilling is expected to start by the end of 2003.
Other big news is the ongoing dispute with Morocco following Madrid's award of two petroleum exploration licenses offshore the Canary Islands in Moroccan controlled seas. Morocco believes the licenses violate international maritime rules. This dispute has not been resolved.
The Portuguese government will open a concession round later this year for deepwater areas between the 200-m water depth line and the limit of the Economic Exclusive Zone. The Geological and Mining Institute will handle the process. Portugal called for nominations, which are due by May 31. Bid deadline is November 30.
The largest project for Italy will actually take place offshore Libya, where Agip Sp A will develop Bouri and NC-41C, which will begin feeding gas into the Italian market in 2005.
After 50 years of failure in producing hydrocarbons in profitable quantities, Malta announced last August that it would try again. A new seismic data set of 5,580 sq km around Malta was made available to oil companies in advance of planned new licensing. Hardman Resources NL, the only company with a current license offshore Malta, was reportedly looking for a partner to finance exploratory drilling southeast of the island.
Syria, Lebanon, Israel, and Cyprus
Last December, seismic data gathered by BG Group indicated possible gas reserves of 70-110 MMcf off Israel's northern coast. The previous month, British Gas announced it would invest $400 million to develop natural gas fields off the Gaza Strip in southern Israel. These reserves were estimated at 50-60 bcf.
In August, Cyprus announced plans to recruit overseas experts to help explore and chart offshore oil and gas deposits. Though no details were released, it appears that the government has evidence of significant reserves. Geophysical research and seismic mapping were planned to evaluate potential resources. Cyprus began actively delineating its boundaries on the continental shelf in order to develop identified reserves. The country is reaching out to Syria in hopes of concluding a bilateral agreement to mark out a continental shelf and establish territorial boundaries. Cyprus has also set up discussions with Egypt, Lebanon, and Israel.