The NCS has long been seen as attractive from a global perspective, with a number of the largest international oil companies established here. Reasons for this include potential for discovery, opportunities to develop technology, available expertise, a stable economy and excellent political conditions.
In 2004, Norwegian authorities received applications from 22 oil companies for the Awards in Predefined Areas (APA) on the NCS. The international nature of applicant companies attested to fact that the NCS is good business, as applicants included subsidiaries of such international oil companies as Marathon Oil, Esso, Shell, Gaz de France and ConocoPhillips.
International interest continued in 2005 as an invitation to bid for blocks in the Barents Sea was announced, the first such in these frontier areas in nearly 10 years. Sixty-four blocks in the Barents and Norwegian seas formed the basis for new activity in northern Norway. Although this year marks the 25th anniversary of the first exploration well in the Norwegiansector of the Barents Sea, the area remains the least explored of the NCS.
Production life on the NCS’s Sleipner field has been extended due to the modification work of Vetco Aibel, among others.
The Rush is On
Large companies traditionally dominated the oil business in Norway, but that has changed over the past several years. Although major oilfields remain in the Norwegian sectors, the majority are smaller – tailor made for smaller companies. Also, tax rules have been updated somewhat, making it more attractive for newcomers to take a shot at making it in the oil and gas business on the NCS.
This new breed includes Discover Petroleum, Revus, PA Resources, as well as Ener Petroleum and Noreco. Discover, Noreco and Ener are start-ups as of 2005 and are listed as applicants for pre-qualification as licensees, having also applied for licenses in the APA 2005. Revus is based in Stavanger and was the first of these Norwegian companies to become established, currently with a North Sea portfolio of 14 licenses and a production of 3,000 barrels of oil per day.
The two Norwegian giants, Statoil and Norsk Hydro, continue to be in the thick of things. Hydro is poised to continue its high exploration activity on the NCS, positioning itself with the acquirement of new licenses with drilling commitments in future licensing rounds and recently announcing the discovery of more oil reserves in the Brent formations in the Troll field in the North Sea. Statoil, the leading integrated oil and gas company in Northern Europe and operator for the majority of Norway’s oil production, continues to post impressive results with production growth, good margins and high regularity in the refineries.
By the numbers
– Norway is currently the third-largest oil exporter in the world
– The Norwegian government has allocated NOK 222.3 million to petroleum research for 2005, NOK 84.8 million more than the year before
– In 2005-2009, nearly 1.4 billion Sm³ o.e. (standard cubic metres of oil equivalents) are expected to be produced and sold on the Norwegian continental shelf (NCS). This is approximately ten percent more than over the last five years
– Over the next 20 years, an estimated 4.7 billion Sm³ o.e. will be produced from the NCS
– The average recovery rate on the Norwegian continental shelf is currently 46 percent, with a goal of 50 percent recovery. Current worldwide average recovery rates for oil are roughly 35 percent
Getting every last drop
The Norwegian oil and gas industry’s goal is long-term sustainability and a long-term production plateau based on disciplined asset management. The Statfjord late phase represents a high-profile, late-phase project. With no action taken, Statfjord’s life would have ebbed out around 2010. However, Statoil received approval to convert the giant oilfield to a gas field, resulting in over NOK 3 billion in EPCI agreements in 2005 with Vetco Aibel, Smedvig and Aker Kværner. Now there is gas production planned until at least 2018.
Vetco Aibel received the first of the outfitting contracts following conversion approval. The scope of the contract included engineering, procurement, construction and installation on Statfjord A, with planned installation of modules and completion of all work by early 2008. Vetco Aibel has also been awarded a modification contract on the Huldra platform to extend tail production until 2010, as well as contracts to maintain production pressure, thereby extending production life on Sleipner.
Smedvig’s contract encompasses the modification of the drill equipment on Statfjord B and C, with planned completion in 2008. No stranger to the Statfjord oilfield, Smedvig has been involved in operations there since 1984. Aker Kværner is involved in the Statfjord late-life project, intended to improve recovery from this Statoil-operated North Sea field and keep it onstream until 2018.
As a consequence of the Statfjord late-life project, the associated Tampen Link pipeline is also being laid to export increased gas output. A 23.1-kilometre pipeline will be laid from Statfjord B to the Flags transport system, which runs from Britain’s Brent field near Statfjord to St Fergus in Scotland.
Gas from the UK share of Statfjord is already piped to land through Flags via the Northern Leg Gas Pipeline. Late-life modification work will also tie the new pipeline into existing pipelines on Statfjord, such as those from Gullfaks and the Gassled transport systems, increasing export capacity for Statoil gas from other fields on the NCS.
The Kristin field has estimated recoverable reserves of 43 billion cubic metres of gas and 240 million barrels of condensate.
Major Projects on the Shelf
Two of the largest endeavours undertaken in recent years on the NCS are the Kristin natural gas, oil and condensate field and the Snøhvit LNG (liquefied natural gas) project. Located in the southwest part of the Halten Bank, Kristin is the largest of several discoveries made by the former Saga Petroleum Company. Statoil’s production from this oil and condensate field began on November 3, 2005, based on the installation of four subsea templates tied to a floating platform, with a planned total of 12 wells. Eight of the wells will be highly deviated – the first of their kind to be drilled as subsea completions in a field with high temperatures and pressure. Situated at a depth of nearly five kilometres below the seabed, the Kristin reservoir has a record pressure of 911 bar and a temperature of 170° C. The field, with estimated recoverable reserves of 43 billion cubic metres of gas and 240 million barrels of condensate, has been described as the most demanding ever developed on the NCS.
The Snøhvit project is important for Statoil and its gas-related activities, representing the first major natural gas delivery to the United States. It is the largest-ever industrial development in northern Norway and the first large-scale LNG project in Europe. Shipments are due to begin in 2007 once the Snøhvit field comes onstream. An annual volume of 2.4 billion cubic metres are due to be shipped to the US, and an additional 1.6 billion cubic metres are due to be shipped to Spain annually. The total annual export from the Snøhvit project is expected to be 5.7 billion cubic metres.
As the NCS becomes more mature, it is of great importance that existing infrastructure and licensed acreage be managed in the best possible manner. To be able to follow the trend in the growth of reserves on the continental shelf, the Norwegian Petroleum Directorate has now set a primary objective target of 5 billion extra reserve barrels by 2015. Measurement of this target will be kept separate from the resource account and production forecasts, thus allowing the precise measurement of the success rate in reaching this ambitious target.
More where that came from
The Norwegian Petroleum Directorate prepares annual updates of estimates of the petroleum resources on the Norwegian continental shelf. These estimates, which include both discovered and undiscovered resources, are gathered together in an inventory called the resource account. Only 60 percent of the NCS has been opened for exploration, so the future potential for oil and gas companies is great.
A substantial part of the petroleum resources on the continental shelf have still not been discovered. These resources are found in all three provinces – the North Sea, the Norwegian Sea and the Barents Sea. Calculations of the undiscovered resources made by the Norwegian Petroleum Directorate show that the assumed, recoverable quantities are approximately equally large in all three provinces, although the quantity of gas is likely to be largest in the Norwegian Sea and that of oil in the North Sea.
Frontiers have always presented challenges and risks to those who have dared to take a step into the unknown, and are not meant for the weak of heart and strength. Today, the NCS is a frontier that beckons those who have the knowledge and the expertise to reap the benefits.
Snøhvit, due to come onstream in 2007, is the largest-ever industrial development in northern Norway and the first large-scale LNG project in Europe.