Majors join bidding for new Norwegian Barents Sea acreage

Offshore staff

OSLO, Norway – Twenty-six oil companies have applied for production licenses under Norway’s 23rd offshore licensing round.

This comprised of 57 announced blocks and part-blocks, of which 54 are in the Barents Sea and three in the Norwegian Sea.

Thirty-four are in the newly opened area in the southeastern Norwegian Barents Sea, previously off-limits until a border dispute with Russia was resolved.

Sissel Eriksen, NPD’s exploration director, said: “It is gratifying to see that so many competent companies want to explore in new acreage during a time when we are experiencing low oil prices and cost cuts.”

INPEX and Kufpec are first-time participants in a new Norwegian licensing round, although INPEX also submitted bids earlier for the rolling-acreage APA 2015 round.

The list of 26 applicants for the 23rd round is as follows:

  • A/S Norske Shell
  • BP Norge AS
  • Capricorn Norge AS
  • Centrica Resources (Norge) AS
  • Chevron Norge AS
  • ConocoPhillips Skandinavia AS
  • DEA Norge AS
  • Det norske oljeselskap ASA
  • DONG E&P Norge AS
  • E.ON E&P Norge AS
  • Edison Norge AS
  • Faroe Petroleum Norge AS
  • Idemitsu Petroleum Norge AS
  • INPEX Norge AS
  • KUFPEC Norway AS
  • Lukoil Overseas North Shelf AS
  • Lundin Norway AS
  • Moeco Oil & Gas Norge AS
  • OMV (Norge) AS
  • PGNiG Upstream International AS
  • Pure E&P Norway AS
  • RN Nordic Oil AS
  • Spike Exploration AS
  • Statoil Petroleum AS
  • Tullow Oil Norge AS  
  • Wintershall Norge AS

All blocks are subject to fishery and environment-related conditions. Norway’s Ministry of Petroleum and Energy plans to award licenses before next summer.

According to analyst Wood Mackenzie, the newly-opened southeastern Barents Sea could hold more than 2 Bboe of oil and gas. Major oil and gas companies such as BP, Chevron, Shell, and Statoil will likely view entry to the region as a long-term strategic move.

Malcolm Dickson, principal North Sea analyst at Wood Mackenzie, said: “Our most recent analysis shows that minimum economic field sizes in this new area - volumes yielding at least a 10% return - at our base case price assumptions are 0.5 Bboe for oil and 1.1 Bboe or 6 tcf for gas/condensate. Therefore, it will be important to find larger discoveries or a critical mass of smaller finds to make development economic.

“However, we could see lower minimum economic field sizes if companies can reduce spend on wells, either through more efficient drilling or cheaper rig contracts. In this case, we could see the minimum economic size for oil drop to 300 MMboe, for instance.” 

Neivan Boroujerdi, Norway upstream analyst, added: “We have seen a big slowdown in global exploration – with less emphasis on frontier areas. This licensing round bucks that trend, as it provides access to a frontier region, where producers can take advantage of the cheap exploration afforded by the Norwegian tax system in the form of a 78% tax rebate – as well as benefitting from an established service sector and – crucially – the least severe operating conditions of any Arctic basin.

“This is a relatively benign environment compared to most other Arctic regions and with virtually no sea ice. The main challenges will come in the form of the remoteness from infrastructure and the potentially difficult hydrocarbon reservoir conditions.”

Dr. Andrew Latham, vice president of exploration research at Wood Mackenzie, said: “Exploration costs in the Norwegian Barents are significantly less than everywhere else in the Arctic offshore. A consortium of over 30 companies has already shared acquisition costs for new 3D seismic.

“Future Norwegian Barents exploration wells might cost around $20 million – when taking the tax rebate into account. This is five to 10 times less than the cost per well offshore Greenland during 2010-2011, and more than 20 times less than the drilling costs in the both Russian and Alaskan offshore Arctic during 2014-2015.”

12/07/2015

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