Barents comes into focus for Norway
There's a lot more gas and oil to be found in the Norwegian Arctic, if the explorers can be persuaded to look for it
Norway is pinning its hopes for the future of its hydrocarbons industry on the Barents Sea. Nine of the 12 exploration licences issued in its 24th Licensing Round are in the Barents, while the government is keen to stress the hydrocarbons potential of newly-surveyed parts of the Arctic region.
The licensing round, whose outcome was announced on June 18, resulted in seven licenses being awarded in the northern Barents—two operated by Aker BP, two by Spirit and one each by Equinor, OMV and Lundin. Two licences in the southern Barents both went to Equinor. Two of three licences awards in the Norwegian Sea are to be operated by Equinor with the other going to a Shell-led group.
The Barents focus was underlined by the Norwegian Petroleum Directorate's (NPDs) updated estimate for "undiscovered resources", released in a report on June 21. The new estimate of 4,000 cubic metres of oil equivalent is some 37% higher than its previous assessment based on 2015 data, the rise largely being promoted by fresh mapping of the north-eastern part of the Barents. The NPD expects about two-thirds of its undiscovered oil and gas resources to be located in the Barents Sea, with remainder in the North Sea and Norwegian Sea.
According to NPD's exploration director Torgeir Stordal, the report showed that after more than half a century of offshore drilling in Norway, about 55% of anticipated oil and gas resources had yet to be produced, of which "just under half have not even been discovered".
The potential may be high, but convincing the industry to sink investment into costly frontier projects in the Arctic is still likely to be a challenge. The 24th round offered up 102 blocks or part blocks in total within the licences, but only 47 were allocated, and the number of firms bidding was also lower than previous rounds. That may reflect the oil price uncertainties when the round was launched in December 2017, so Norway will be hopeful that the oil price rally since then will encourage the explorers to drill.
UK licensing round
A similar picture emerged from the UK's 30th offshore licensing round, which was launched in July 2017, when the oil price was below $50 a barrel, and for which awards were made in May. This focused on acreage adjacent to existing fields, rather than frontier areas and was notable for stronger interest than some had expected from supermajors such as BP and Shell. They have been selling off long-held mature North Sea assets with dwindling profitability on both sides of the UK-Norway maritime border of late.
But the award of 123 licences over 229 blocks or part-blocks, out of a total 813 blocks or part blocks on offer, still reflected muted interest compared to the North Sea's heyday. The UK's next licensing round is due to focus on frontier acreage towards the Atlantic Ocean, the success of which will almost certainly depend on current higher oil prices being maintained, even if the industry has cut operating costs considerably over the last four years.
Shell's asset sale
Meanwhile, the supermajors are still busy "streamlining" their North Sea assets. The latest example is Shell's sale of its stake in two Norwegian offshore fields to OKEA. The Trondheim-based minnow is buying Shell's 44.56% stake in the Draugen field and 12% stake in the Gjoa field for around $556m. OKEA says Shell's stakes represented net production of around 22,000 barrels a day, based on January 2018 data.