Depending on where explorers focus their drillbits, the challenges of exploring for and producing oil in the Barents Sea can be significant. Yet, these challenges are being tackled because more operators are seeing the basin’s potential.

Exploration activity started in the Barents in the 1980s, said Neivan Boroujerdi, senior analyst Norway upstream oil and gas, for Wood Mackenzie. “But what was found, including Snøhvit, was gas, which saw companies ‘take a breather’ from the region,” he said. “It wasn’t until the Goliat oil field was discovered that companies really got started, which has led to the Johan Castberg development being sanctioned last year” with more projects already in the wings, including Wisting and Alta.

Although Barents Sea exploration activity dropped off during the downturn, it picked up again last year, with 17 wells drilled—a new record for exploration drilling in the Barents Sea, according to the Norwegian Petroleum Directorate (NPD). The biggest discovery in Norway in 2017 was Lundin’s Filicudi well in the Barents Sea.

Neivan said the overall volumes discovered in the Barents Sea in 2017 were poor. “Last year’s results gave us more questions than answers,” he said. However, “the fundamentals remain in place.”

Close to 5 Bboe have been discovered to date, half of which is gas. Wood Mackenzie thinks half of this is commercial or potentially commercial.

Light of hope

The NPD also sees potential here, stating that two-thirds of Norway’s undiscovered resources are in the Barents Sea.

Large undiscovered resources suggest the potential for future spending in the region. Upstream investment in Norway in 2018 will be half that of 2014 when spending peaked, Neivan said, adding $15 billion per year is “a new normal.”

“What’s worrying, looking beyond 2023 and the start of the middle of the next decade, is that we are not getting visibility of new projects coming in to the pipeline.”

Against this backdrop, the Barents Sea could be a light of hope. Spending in the Barents is projected to increase from just 5% this year to about 30% of the total by 2020s. Of the 10 Bbbl expected to be discovered offshore Norway between now and 2035, Wood Mackenzie believes nearly half of that will come from the Barents Sea, Neivan said.

“This tells us the Barents will be fundamental to the future of the Norwegian Continental Shelf,” Neivan continued.

New projects are already well underway. In June 2018 Equinor’s Johan Castberg development was approved. First oil on the floating production development, which will tap some 450 MMboe to 650 MMboe recoverable, is expected in 2022. Askeladd, a subsea tieback development into the existing Snøhvit facilities, was sanctioned earlier this year and is due onstream in 2020.

Challenges

However, the region is not the easiest workplace. Technical challenges include a harsh remote environment with limited logistics and difficult-to-drill shallow and complex reservoirs. Depending on the location in the Barents, sea ice and freezing conditions can be a major challenge, and in winter the area can be in darkness for long periods, which raises issues such as the ability to detect and track oil spills.

These issues can lead to marginal economics, Neivan said. However, this hasn’t stopped companies from innovating.

In 2016 Austrian operator OMV, with the help of Schlumberger, delivered a horizontal well drilling record; the appraisal well on the Wisting Field landed out horizontally less than 270 m (886 ft) below the seabed. Companies also are collaborating to share resources in areas such as logistics, oil spill response and evacuation and emergency resources. Equinor and Eni, for example, are sharing a contract with Bristow Helicopters for crew transfer and search and rescue operations.

In short, companies are finding ways to operate in the area. Costs also have been falling, which has helped.

“We expect activity to remain pretty robust in the Barents over the next 18 months,” Neivan said. “It’s now 60% cheaper to drill in the Barents than it was in 2013 through lower rig rates but mainly through better rig performance. They’re drilling more meters per day, and if you combine that with the exploration tax rebate [which companies receive offshore Norway], it’s still an attractive place to explore, despite poor results to date.”

Drilling plans

Equinor’s drilling campaign for this year—comprising four operated exploration wells and one nonoperated well—has been set back due to delays accessing the rig that the company planned to use. However, the company said when it does start drilling in October, the 2018 activities will roll in to its 2019 plan. So far the firm has set out plans to drill on Korpfjell Deep and Gjøkåsen in the harsher eastern Barents and Intrepid Eagle, Skruis and Shenzhou in the western Barents Sea.

Others also are drilling in the Barents. In the western Barents Sea, DEA is planning to drill at Gråspett, Spirit Energy is planning to drill the Scarecrow prospect and Lundin at Setter Pointer. In the eastern Barents, Aker BP is planning drilling on the Stangnestind prospect at the Fedynsky High.

Most are targeting oil, as it is an easier commodity to store and ship. But there is also gas, a commodity that Norway supplies in vast amounts to Europe.

Wood Mackenzie assessed what would be a commercial-sized discovery, using license PL 961 as an example. It found that a minimum economic field size would need to be 99 Bcm (3.5 Tcf), using a semisubmersible to produce the gas and a pipeline to shore to export it, “and that’s an optimistic best case,” Neivan said.

If up to 198 Bcm (7 Tcf) of neighboring resources could feed the infrastructure, it would make it a worthwhile prize, he said.

Yet companies are not being incentivized to go for gas, he added. And “given long lead times in Barents [on average 15 years], the time is right to have that discussion now.”

Ways to get gas out of the Barents Sea already are being discussed.

According to Andreas Wulff, communication manager for ENI Norge, Gassco performed a study in 2014 on the possibility of extending the gas pipeline system from the Norwegian Sea to Barents Sea. At the time, the conclusion was that it was too expensive. But the idea is being studied again, and the work so far shows there’s been a 40% to 50% cost reduction for the work, Wulff said, speaking at ONS in August in Stavanger.

“The world has changed in a positive direction for a gas pipeline to the Barents Sea,” he said. Earlier this year, Gassco said it was making an infrastructure plan for the region.

Comments