artic upstream

8/13/2019 Artic Upstream

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W t ~ ~ a ~ J ~ t f o l l ~ e i : ( ) f j f s h o r e Greenland and estimates unrisked prospective resources within its licence1 t 1 1 1 i 6 i : f . b i o e ; During 2010 and 2 11 , Cairn completed its first phase of exploration drilling in a variety of

basins Although no commercial discoveries were made, drilling was deemed successful in proving then cessary geological elements were present across the Greenlandic basins.

Cairn s current focus in Greenland is on the Pitu block in Baffin Bay, located over 800 km north of t e Arctic Circle.Cairn, along with its jOint venture partners Nunaoil and Statoil, will take a drilling decision in 2013 to target an explorationwell in 2014, subject to the necessary approvals. Meanwhile, Greenland has halted the granting of any new offshore drillinglicences while current licences are being reviewed and more stringent safety standards are being developed.

=At ti of 2012, Iceldnd awarded its first e v e i I l y d r o c a r ~ C ? n e ~ l o i a t i o nlicences. Twelve locks were awarded as two sparate licences tooperators Ithaca Energy and Faroe Petroleum. Both licences have a drillor drop commitment to e made before an initial four year term endsand Faroe Petroleum has already announced tha t it has mappedseveral large structures and is in the process of de-riskingthese leads. In addition, recent newssuggests that CNOOCwill also be awardedacreage laterin 2013.


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NorwayThe Norwegian sector of the Barents Sea is one of the few areas ofthe Arctic Circle with a year-round ice-free zone and is estimatedto hold undiscovered resources of 7.9 billion boe, according to theNorwegian Petroleum Directorate NPD), which represents 42 of allundiscovered resources offshore Norway.

Compared to other Norwegian waters, the Barents Sea isunderexplored . In total, approximately 80 exploration wells have beendrilled in this region compared to almost 200 in the Norwegian Seaand over 700 in the North Sea. Geological exploration of theNorwegian sector of the Barents Sea started with seismic surveys inthe 1970s and a decade later exploratory drilling commenced whenboth Norsk Hydro and Statoil spudded wells, both of which werecompleted with hydrocarbon shows.

There have been a number of discoveries made in the regionin recent years, which have gone towards proving plays and theexistence of working hydrocarbon systems in the Barents Sea. Inparticular, Statoil's success with the Johan Castberg and Havisoil discoveries in 2011 and 2012 respectively has had a largeimpact in highlighting the oteAtial of this area. Th ese discoveries

a i 1 e - c o m b i n r e c o e r a b I H T E f f i O u r c e s l ~ s r n a t e t t t a : b e : : b e l e400 - 600 million boe and were the largest and first commercialfinds in the Barents Sea for over a decade. Statoil expects to havea field development plan fo r Johan Castberg in place by 2014 andproduction is anticipated to start in 2018.

The Goliat field was the first oil discovery to be developed inthe Barents Sea. The field was originally discovered in 2000 and theplan for development was approved in June 2009. The operator,ENI Norge, plans to bring the field on stream before the endof 2014 and anticipates production for up to 15 years. The field hasestimated recoverable oil reserves of 174 million bbls of oil and totaldevelopment costs are approximately NOK 30 billion.

The most recent licensing round to cover the Barents Sea, the22nd round, was awarded in June 2013. This was the most successfullicensing round in terms of Barents Sea acreage and it has increasedthe number of licences in the region to over 70. For the first time,awards have also been made to two Russian companies, Lukoil andRosneft.

The Norwegian Government has now called for blocknominations for its planned 23rd Licensing Round in which it willopen a 44 000 km2Arctic area, formerly disputed with Russia that isestimated to hold approximately 1.9 billion boe. The round will markthe first time since 1994 that Norway has opened up a new area of itscontinental shelf.RussiaLarge reserves of oil and gas are concentrated across theRussian Shelf of the Barents Sea; however, Russia is only at theearly stage of development in the Barents Sea. Moreover, thestate has a clear intention to increase the amount of geologicalinvestigation and research in this region, in particular through thedevelopment of new forms of entry of companies to the shelf. Thestate is also trying to stimulate companies' interest through a zeroexport duty on oil and gas extracted a t the shelf. Russian companiesare also interested in increasing the amount of geological explorationwork, including forming alliances with foreign companies withexperience and developed technologies to operate in the polarlatitudes of the Russian Shelf.

According to the latest estimations, over half of combined oiland gas resources, i.e. approximately 100 bill ion t of oil equivalent,is accounted to the Russian segment of the Arctic. Furthermore, the

8 I O ILFIELD TECHNOLOGYNovember 2013

volume of C1 reserves is approximately 6 trillion m 3 of gas and176 million t of oil. It is difficult to obtain exact estimates of potentialhydrocarbon resources due to the extremely low level of geologicalknowledge and the irregularity of investigations in the region.

Hydrocarbon exploration of Russian areas lying on theArctic Shelf began in earnest in 1982 with the majority of explorationand discoveries having occurred in the 80s and early 90s. It is duringthis period in particular that large deposits were discovered, suchas the Prirazlomnoe oilfield (1989) and the Shtokmanovskoe (1988),Rusanovskoe (1989) and Leningradskoe (1990) gas deposits.

Since then and up to the 2000s there had not been muchgeological exploration in the Russian Arctic due to factors includingthe state of the Russian economy. Interest levels began to rise againin the mid-2000s when clarifications were made to the border of theRussian Continental Shelf and further exploration of the bottom ofthe Arctic Ocean took place.

As of today, less than 100 wells have been drilled , located within

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the seas of the West Arctic. The density of seismic knowledge in the Zpossible regions of the Barents and Pechora Seas is also sparse, Ihowever, c u r r over 500 local str ctu[es: iJave-.bee o...id.entif ied -s=aeposlts ave een l s c o ~ e r e C C O f f t f i e [ [f e rc Ic-seas

In 2008, the Russian government passed a law, accordingto which licensed exploration and development of the Russiancontinental shelf is only possible on the basis of an order from thegovernment to companies with similar experience and work ofno less than five years while the state maintains majority interestof over 50 . Currently in Russia, there are only three companiesthat comply with this requirement, namely Gazprom, Rosneft anda company that received this right very recently, Zarubezhneft.Therefore, in order for any other company to gain access to theshelf projects, they must create a joint venture with any of thethree companies indicated above. However, other forms of accessto the shelf are under discussion within the government, and maymake it possible for other private companies to receive this rightin the future. Such a decision is being actively lobbied by businessrepresentatives, in particular, representatives from the largestRussian private oil and gas company, Lukoil.

In terms of the current distribution of licences, Gazprom owns22 licences on the Arctic Shelf. Production from the Prirazlomnoeoilfield with estimated C1 reserves of 46.5 t of oil is expected tocommence before the end of 2013, marking first production from theRussian Arctic Shelf. It is worth highlighting that operations will beconducted with one of the first Russian Sea platforms, the offshoreice-resistant fixed platform Priraz omnaya.

Rosneft currently owns 23 licences and in the summer of 2013,Rosneft began geological exploration work and environmentalsurveys at two sites in the Barents Sea, while in 2014, is planningto drill an exploration well in the Kara Sea. Rosneft will develop theresources at these sites with ExxonMobil , Statoil and Eni.

Finally, Zarubezhneft has currently one application for a licensedsite in the Barents Sea, which the company intends to develop inco-operation with PetroVietnam.North merica and CanadaIn Canada, approximately 40 4 million km2) of the land mass liesnorth of 60, which is the latitude separating the oil-rich provincesof the west with the largely under-explored northern territorialareas. Approximately 25 of the total land mass lies north of theArctic Circle, however this number does not account for the largeareas under the shallow water of the Arctic Continental Shelf. Froma geological point of view, much of the reg ion is an extension of the

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successful Western Canadian sedimentary basin. However, despitethis seeming potential, uncertainties abound as to how, when andeven if it will ever be developed.

The quest for Arctic oil and gas began early in Canada in 1920when the world's northernmost oilfield, the Norman Wells fieldwas discovered under the thick ice of the Mackenzie River in theNorth West Territories. Since 1932, the field has produced over260 million bbls, although most of this production occurred afterthe Norman Wells Expansion project in 1985 - 86. In addition toNorman Wells, the Mackenzie Valley has seen 27 other discoveriesand one other producing field (Cameron Hills).

In the Arctic Islands of Nunavut, there have been 19 discoveriesfrom less than 200 exploration wells in total. The Bent Horn fieldhad produced nearly 3 million bbls of light oil for shipment by tankerthrough the Northwest Passage from 1895 to 1996 when it wasabandoned by Suncor. The Canadian Broadcasting Corporation(CBC) reported earlier this year that the federal government planned toredevelop Bent Horn in an eventual call for bids.

The Mackenzie Delta and Beaufort Sea together encompass to60 significant ElisGoveries with total 21::> reserves of 1 billion bbls of -oil-ancHf)irillioiT'fP-'ofgas. Agproximatel}CQ tl ---ofthatgas-CillIlefrom three onshore discoveries that would have anchored the hotlycontested, C$ 16 billion Mackenzie Gas Pipeline, before it was shelvedin 2012 after a decade of regulatory review.

In June 2012, Shell Canada Limited was awarded154 000 hectares on two exploration licences in the Mackenzie Valleywith work commitment bids totalling over C$ 90 million, one yearafter Husky Energy pledged CAD$ 376 million in the same region.The real story of 2012 however, lies in the Beaufort Sea, whereFranklin Petroleum drew attention when it won six parcels totalling

approximately 900 000 hectares (the largest Arctic land rights award inCanadian history) with bids totalling just C$ 7.5 million. It leaves Franklinas the second largest acreage holder in the Canadian Arctic (behindShell and followed by BP, MGM Energy and Imperial Oil) and the largestin the Beaufort Sea. It seems that in Canada companies now prefer thelandlocked region of the Mackenzie Valley to the more environmentallysensitive and rugged offshore areas of the far north.

This year, calls for bids are currently pending in the Mackenzie Valley(six parcels) and Arctic Islands (Bent Horn) although little interest wasshown by industry in the previous Arctic Islands' call for nominations. Acall for nominations is also pending in the Beaufort Sea.onclusions

To date, geological exploration within the Arctic Circle has beengeographically sparse and somewhat sporadic. However, based oncurrent licences with outstanding work commitments and plannedexploration drilling across the different regions of the Article Circle,interest and activity is expected to continue to rise.

However, working safely and in an environmentally friendly fashionis becoming increasin l Y imQortant to the u b l i c QerceQion of activi'a :JIJisJ>e giD TIm rn:golcrtQr:y4e tJews:::Wjll cont inue la::ne 0 slgolf lcaoce.The number of companies with the experience, know-how andtechnology able to operate safely and efficiently in Arctic conditionsshould increase as border issues are resolved to open up the area tocompanies and partnerships that can tackle the challenges the Arctichas to offer. oReference1, Proven reserves associated with the fields that are available for productionafter a development plan is agreed,

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illIB ITbJITap 1] n an IFor 5 years Delmar Systems Inc. hasbeen serving the oil and gas industryaround the world including the Arctic. With

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