North Sea holds steady

Though there has been resurgence in E&P in the UK North Sea, there is some skepticism about whether the level of investment will continue. High rig rates and a lack of new tax incentives could cause companies to rein in their drilling plans.

On a more optimistic note, Hannon Westwood expects to see 50-60 exploration and appraisal wells this year. This number is just short of the 61 E&A wells spudded in 2005.

The company expects the final analysis of 2006 to prove that it was one of the most successful years for reserves additions in the North Sea since the early 1990s. This news is encouraging for continued exploration and appraisal drilling, the company says.

Last year saw some significant discoveries, the largest of which was ConocoPhillips’ Jasmine gas and condensate field last September at a reported 175 MMboe. Jasmine, the biggest North Sea gas find since Buzzard, lies in blocks 30/6 and 30/7 in the Central North Sea 9 km (5 mi) west of the Judy development. Production is expected in 2010.

In 2Q 2006, Canada’s Oilexco found oil on the Disraeli prospect in the UK Central North Sea on block 21/23a. Disraeli lies southwest of PetroCanada’s Saxon, a 2005 oil find in a similar geological setting.

Gaz de France Britain also had a new find, 170 km (106 mi) off England’s Lincolnshire coast in the southern gas basin. The Cygnus 44/12-2 well encountered several gas-bearing zones, confirming the northern extension of prospectivity in this part of the southern sector.

Last June, BG Group and Amerada achieved first gas from their jointly developed Atlantic and Cromarty fields in the Outer Moray Firth.

In July 2006, Chevron North Sea Ltd. brought the Captain Area C project in block 13/22a in the Inner Moray Firth onstream at a rate of 9,000 b/d of oil, with peak production of 15,000 b/d achieved soon after startup.

And last November, Serica Energy Plc. announced initial results of the Columbus exploratory well in block 23/16f. The well encountered a gross gas column of at least 38 m (125 ft).

Offshore southern Ireland, Marathon Oil took control of the Seven Heads gas field in the Celtic Sea early last year. In 2007, the company hopes to mount a probe of the potentially giant deepwater structure Killal in western Ireland’s Rockall basin.

Also offshore Ireland, Dublin-based Providence Resources farmed out a portion of the Dunquin prospect to ExxonMobil. The Dunquin license extends over 700 sq km (270 sq mi) in the Porcupine basin. The farm-in entitles ExxonMobil to 80% of Dunquin. In return, ExxonMobil will finance an upcoming 2D long-offset seismic survey over the acreage and up to two exploration wells.

Ireland’s government accepted applications early last year for acreage in the Slyne-Erris-Donegal bidding round. Among the applicants, Island Oil & Gas bid for blocks in the Southern Slyne and Donegal Basins, where potential structures have been mapped.

In June, Island Oil & Gas tested gas with the first well of its 2006-2007 Celtic Sea drilling program. In July, the company tested gas from its second well on the Old Head of Kinsale prospect. This is the first new discovery in the region since 1990.

Well log analysis completed in August indicates the gas extends over more than 22 sq km (8.5 sq mi) and that potential volumes of gas in place are 90-120 bcf.

Meanwhile, a number of small companies are shooting deepwater seismic surveys with a view to bringing in partners if the data indicate commercial reserves.

Dutch, Danish sectors

In early Jan. 2006, Gaz de France brought four gas fields onstream simultaneously, doubling its production capacity off The Netherlands. The $401-million project involved construction of two new platforms and a subsea completion.

In 1Q 2006, Unocal Netherlands began its first major new project in the region following its merger with Chevron. In partnership with Dyas, DSM, and Dutch state company EBN, Unocal’s A&B development encompasses two exploration and five production licenses in the northern part of the Dutch sector.

The Danish Energy Agency (DEA) expects exploration activity offshore Denmark to intensify following the award of 14 new licenses last year. The DEA says the combined 6th Licensing Round programs carry a commitment for seven firm wells and 12 contingent wells, with an overall investment pledge of around $413 million.

Four of the successful bidders are first-time operators on the shelf. One of them, Wintershall, recently outlined plans to begin drilling its three blocks in 2008.

The DEA says in 2005 the total Danish acreage covered by new seismic surveys was the largest in the sector for over five years. Positive survey results could lay the framework for additional exploration drilling.

Norwegian North Sea

Norway saw a fairly busy 2006 as well. Norway’s Energy Ministry opened acreage under the country’s 2006 pre-defined areas scheme (APA 2006). The 48 production licenses awarded are a record for a Norwegian round, and a further 10 could be issued following processing of work plans.

The permits, covering 85 blocks and part-blocks, were divided among 33 oil companies, including eight new to the Norwegian shelf.

The biggest winner in terms of license positions was Revus Energy with nine blocks. The company already had plans to participate in up to eight Norwegian shelf wells this year.

North Sea fields under development that are expected to begin production this year include Alvheim, Blane (which is unitized across UK/Norway median line), Enoch (in block 16/13a of the UKCS and block 15/5 of the NCS), Vilje (north of the Heimdal field), and Volve in the southern Viking Graben area between Heimdal and Sleipner. Tyrihans, in the Halten Banken area 35 km (22 mi) southeast of the Kristin field in 285 m (935 ft) of water, is also under development.

Norwegian Sea

In mid-March Norway’s government approved Statoil’s $390-million development plan for the Alve gas-condensate field in the Norwegian Sea. Drilling is expected to begin in August, with production by the end of 2008.

Statoil will develop the 6.78 bcm (239 bcf), 8.3 MMbbl field in phases via a four-slot subsea template tied back to theNorne FPSO.

BG will drill the undeveloped Bream oil field in the southern part of the Norwegian North Sea this year. And Total will drill an appraisal well on the Victoria gas structure.

Of course, the biggest project in the Norwegian Sea is Ormen Lange on blocks 6305/4, 6305/5, 6305/6, and 6305/8. At 315 bcm of gas, Ormen Lange is Norway’s second largest gas field and the largest gas field under development on the NCS. Production is expected to begin in October.

Barents Sea

The Norwegian Petroleum Directorate reports three discoveries in the Barents Sea in 2006, the largest of which was Eni’s 7122/7-3 well on the Goliat discovery. In addition to delimiting the discovery, this well struck oil in the Kobbe formation. The well also resulted in a new, minor oil discovery in deeper drilling targets in a previously undrilled level in this part of the Barents Sea.

In late February 2007, Hydro hit oil and gas on the Nucula prospect 110 km (68 mi) northeast of the Goliat discovery and 65 km (40 mi) north of the Norwegian town of Honningsvåg.

New provinces continue to open up as drilling continues in this under-explored area.

Meanwhile, Snøhvit is still on track to come onstream in 2007.

Mediterranean Sea

Egypt has seen a fair amount of activity over the past year, and the future holds more of the same.

Last June, Egypt and Eni signed an exploration agreement for the El-Bougaz block in the Mediterranean Sea. Eni plans to expand the Damietta gas liquefaction plant to double its capacity, which will lay the groundwork for more exploration and development in Egypt, especially the Nile Delta deepwater fields.

Also in June, Centurion Energy and Shell spudded the Luzi-1 exploration well in the West El Manzala concession, targeting a prospect on trend with the existing El Wastani field. The well encountered gas at a depth of 1,009 m (3,310 ft), leading to exploration wells being planned on the eastern side of the West El Manzala concession.

In October, the company announced a 2007 drilling plan that includes 10 exploration and appraisal wells and two development wells.

In November, Egypt awarded eight of 12 blocks offered in its 2006 bid round. PTTEP was among the winners with the 4,294-sq-km (1,658 sq mi) Sidi Abd El Rahman block, which carries a work commitment of 3D seismic surveying and an exploration well in the first three years. OMV Exploration & Production GmbH will explore block 11, which covers 9,140 sq km (3,529 sq mi).

In addition to the bid round blocks, a further offshore award was made to Tharwa Petroleum. The 2,281-sq-km (881-sq-mi) El Arish exploration block is offshore Sinai. It is the easternmost block of the offshore Nile Delta and includes eight wells.

Dana Gas plans to drill 15 wells in Egypt in the coming year through subsidiary, Centurion Energy. Ten exploration and five development wells are planned, with target depths ranging from 1,000 m to 4,000 m (3,280-13,123 ft).

In January, BP Egypt hit gas with the Giza North-1 well in the North Alexandria concession. BP estimates reserves for the Giza complex at more than 1 tcf of gas. An appraisal well was scheduled for April in the Taurus field as part of a planned four-well appraisal program.

With boycotts and restrictions out of the way, Libya is back in the E&P game, and a handful of companies are actively pursuing offshore acreage.

Russia’s Gazprom is one of the successful bidders. On Dec. 20, 2006, Gazprom was declared the winner among 45 contenders for block 19, which garnered the company an upstream license for up to 30 years. At present, Gazprom expects to spend more than $200 million for geological exploration and drilling. Plans include drilling six exploration wells.

Exxon Mobil Corp. subsidiary ExxonMobil Libya Ltd. signed an exploration and production-sharing agreement with Libya’s National Oil Corp. to begin exploration in the offshore Sirte basin.

The agreement includes four blocks in Contract Area 20, about 161 km (100 mi) off the Libyan coast.

Offshore Tunisia has seen a fair amount of activity as well.

In Aug. 2007, TGS-Nopec Geophysical Co. announced a multi-client 600-sq-km (232 sq mi) 3D survey in the El Louza block. And last November, Plectrum Petroleum Plc. awarded CGG a contract to acquire 3,000 km (1,864 mi) of 2D seismic data over the Nabeul block.

The processed data will open the next wave of exploration drilling.

Tunisia’s offshore reserves are also moving into production.

The Oudna field began production in Nov. 2006. And in April 2007, PA Resources began regular production from the platform on the Didon field at 20,000 b/d oil.

Early this year, Northern Petroleum landed three new offshore licenses adjacent to its permits offshore southern Italy. The licenses are the re-designated G.R20.NP (ex-d23GR.-NP), G.R21.NP (ex-d22GR.-NP), and G.R22.NP (ex-d24GR.-NP). All are next to Northern’s existing three licenses in the Apennine-Maghreb thrust belt west of Sicily and adjoining the Tunisian median line. Across the border, Anadarko, PetroCanada, and Shell hold interests in the equivalent structural setting.

Northern believes its enlarged offshore acreage, now extending over 4,370 sq km (1,687 sq mi), has strong oil-bearing potential.

Cyprus, Lebanon, Syria

It looks as if a fair amount of Mediterranean acreage will soon be on the auction block.

PGS, in cooperation with the Cyprus Ministry of Commerce, Industry and Tourism, officially opened the first licensing round offshore Cyprus on Feb. 15, 2007, in Nicosia, Cyprus.

Unfortunately, politics has raised its ugly head. Turkey wants to have a say in exploration offshore Cyprus, and the protests at being left out of the equation might throw a wrench into the cogs.

While Cyprus sorts out its political issues, new seismic acquisition is going on nearby.

PGS is acquiring two new multi-client 3D surveys offshore Lebanon, one covering 1,500 sq km (579 sq mi) and the other covering 1,000 sq km (386 sq mi). These surveys are to form the basis for the first licensing round offshore Lebanon later this year.

And a little further north, Syria reportedly is preparing to offer new offshore and onshore blocks to international oil companies as well, though no formal plans have been announced.