Hope Wanes for `Elephant’ Oil Finds in Norway’s Arctic Waters

Photo credit: Harald Pettersen/Statoil

By Mikael Holter (Bloomberg) — After a disappointing year for drillers, Norwegian authorities are reviewing their hopes for the Nordic country’s hottest exploration area.

“In the part of the Barents Sea that’s currently open, you’ve sort of tried the elephants — the big opportunities,” Bente Nyland, the head of the Norwegian Petroleum Directorate, said in an interview “You’re now down to the next generation in size.”

That means the industry regulator would be happy with any discovery of about 500 million barrels of oil, she said. That’s a far cry from the multi-billion barrel deposits discovered in the North Sea, which have helped Norway become one of the world’s richest countries over the past decades.

A record drilling campaign in the Barents last year yielded only one oil discovery with commercial potential. A particular disappointment was Statoil ASA’s Korpfjell well, the first to be drilled in the newly-opened Barents Sea South-East region abutting Russian waters. Estimated to have billion-barrel potential, the prospect proved to hold only unprofitable amounts of gas.

Even so, Norway will in the coming years enjoy a revival in oil and gas production that the industry wouldn’t have dared to dream of just a few years ago, the NPD predicted in annual forecasts published on Thursday. But the dismal exploration results and moderate expectations for discoveries in the Barents still represent a threat to output in the second part of next decade. The Arctic area holds more than half of Norway’s undiscovered resources, and will be key if Norway wants to limit a forecast drop in output after 2023.

The oil majors recently largely snubbed a new licensing round focusing on the Barents, sparking worries in the industry. Disappointing exploration results and few chances of finding new big deposits could be part of the explanation, Nyland said.

Read more about oil majors snubbing new blocks in Barents Sea

But the NPD was also happy that the companies with the most focus on the Barents in recent years continue to take interest, such as Statoil, Lundin Petroleum AB and Aker BP ASA.

“As long as the companies that know how to operate the Barents sea apply and are active, it’s all right,” she said. “They have been active, they have explored, they’ve built competence, they have capacity and capital, and good organizations.”

© 2018 Bloomberg L.P

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