THE NETHERLANDS Dutch drilling set to stabilise following licensing overhaul

Table: Forecast Dutch Mobile Drilling Rig Demand (rig years) Fifteen exploration/appraisal wells could be spudded in The Netherlands this year, according to Edinburgh analysts Wood Mackenzie. That would represent a 36% increase on 1994 levels, when offshore drilling activity descended to near-record lows. The forecast rise this year will come partly from the drilling of a number of wells which were delayed in 1994. Also, NAM and Elf are expected to maintain their current levels, and five other

Drilling expected to increase by 36% over 1994, total rig demand to rise to 5.7 years

Fifteen exploration/appraisal wells could be spudded in The Netherlands this year, according to Edinburgh analysts Wood Mackenzie. That would represent a 36% increase on 1994 levels, when offshore drilling activity descended to near-record lows.

The forecast rise this year will come partly from the drilling of a number of wells which were delayed in 1994. Also, NAM and Elf are expected to maintain their current levels, and five other companies look set to drill, with Clyde probably the most active.

Development drilling should also beat 1994 levels. Key projects here are Elf Petroland's K/4b-K/5a gasfield complex, the K11-FB and Unocal's Horizon fields. Compared with previous years, however, activity will be subdued. Total rig demand in The Netherlands should rise to around 5.7 years, says Wood Mackenzie, nearly 40% up on the 1993 level.

The analyst does not foresee the Dutch authorities pressurising operators to drill outstanding commitment wells from previous licensing rounds; in fact it sees a significant number of Dutch licences being relinquished in the near future.

This month, the country's ninth licensing round will be open for applications. An open door policy is expected to be introduced for licensing. Once an application has been put forward for a block, competitive applications will be accepted for 13 weeks after submission of the first bid. Then the authorities will perform their evaluations and award licences: duration of these licences will reflect work commitments.

Wood Mackenzie expects the open-door policy to lead to a reduction in commitment wells on future licences: as a result, realistic drilling targets could be set, leading to stabilisation of exploration activity in the Dutch sector.

Last year, a number of improvements were announced to the Dutch fiscal system, and Gasunie eased offtake terms for small gas developments. Long term, this could rejuvenate activity in the province.

Well spuds to date this year include a programme by Wintershall southwest of block E/18, thought to be targeting the Rotliegendes. NAM has made three gas discoveries to the south of this block. NAM itself spudded a well in L/9 in the south of the Dutch Central Graben, where gas has also been discovered in the past. Clyde's exercise in part-block P/18.5, entered in January, is the first well ever drilled here. If gas were discovered, it would probably be developed as a tie-back to the Rijn Field infrastructure.

Production

Wood Mackenzie has predicted an 8% plunge in oil/NGL production offshore The Netherlands this year to an average of 53,000 b/d. Last year's output was boosted by production from three new fields, although output has since dropped steadily.

That downward trend should continue the first half of this year. However, output from Horizon could climb to 15,000 b/d with Unocal planning to complete two new production wells on the field shortly. This would maintain Unocal's position as the largest oil/NGL producer offshore The Netherlands.


Occidental Sizes up Placid's assets

The Netherlands' most reluctant stalwart, Placid International Oil, is finally free of its responsibilities following the $250 million takeover of its parent company by Occidental. But the fate of these Dutch interests is still unclear.

Placid had been wanting to pull out of the Dutch sector for some time, mainly, it was assumed, due to disillusionment with E&P terms on the shelf. However, it had also announced plans for exploration wells in seven offshore blocks, dependent on changes to the Dutch fiscal regime being passed by parliament this year.

Although Occidental is more internationally focused, following restructuring early this decade, Placid's US Gulf assets may have been the real draw. Strategically, a presence in The Netherlands or the North Sea might not make sense to Occidental, which only four years ago sold its UKCS interests to Elf.

This year, Placid International was due to bring onstream the 235 bcf K/11FB gas field as a wellhead satellite to the K/12C-A platform. Altogether it operates seven production licences in the Dutch sector, within which 22 steel platforms are ultimately tied to the Noordgastransport (NGT) pipeline system that Placid also operates. According to UK analyst Wood Mackenzie, this may be a key asset for Occidental to hang onto.

NGT is the main transportation pipeline for gas from the central Dutch offshore sector fields to the terminal at Uithuizen. After this year, spare capacity will increase, which may interest UK gas producers looking to export to continental Europe - especially as the hub of the line, Placid's L/10, has ready-made infrastructure. In that case it might compete with the proposed UK-Continent Interconnector pipeline, says Wood Mackenzie.

If Occidental decides not to sell out of The Netherlands, it is unlikely to be tempted to join the bidding for the country's 9th offshore licensing round, covering all remaining acreage on the shelf. And neither would the other majors, unless the proposed fiscal changes are voted through. These include a reduction in state participation in new oil and gas production licences from 50 to 40%; no royalty payable on small fields while oil prices remain low; and depreciation at will on fixed assets.

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