By Mikael Holter (Bloomberg) — Oil companies in Norway have more to rejoice about than just higher crude prices: they’re now boasting the best exploration results in almost a decade.
If they keep that pace up, explorers could find close to 1 billion barrels of new oil and gas this year for the first time since the landmark discovery of the giant Johan Sverdrup oil field in 2010.
The results are a welcome boost to Norway, which depends on exploration success to replenish a dwindling project pipeline and limit a drop in production from the middle of the next decade. The nation is emerging from a bruising three-year slump that saw oil companies cut budgets to the bone, strangling exploration activity. Results in the promising Arctic Barents Sea, which saw record efforts last year despite the downturn, were also a disappointment.
The tide could now be turning: with 10 wildcat wells completed in 2018, explorers have found about 330 million barrels of oil equivalent, according to Bloomberg calculations based on the mid-point estimate for all discoveries reported by the Norwegian Petroleum Directorate. That’s already more than what the 24 wildcat wells delivered last year. And it’s the best performance per well since the Sverdrup discovery pushed the 2010 average to almost 100 million barrels.
Companies that focused on exploration near infrastructure over the past couple of years are now taking more risk, said Torgeir Stordal, the NPD’s exploration director.
“Prices are now coming back up, so activity is picking up, and they’ll want to drill wells that they might have held back on when oil prices were low,” he said in an interview in Stavanger on Thursday. “It’s a positive development.”
The NPD expects as many as 50 exploration wells this year, up from 36 last year, it said in a report published on Thursday. About 30 could be wildcat wells testing new prospects, meaning discovered resources could reach a total of 1 billion barrels if explorers maintain their efficiency.
“We’re drilling more wells and are being more aggressive,” said Gro Haatvedt, head of exploration at Aker BP ASA, one of the most active explorers offshore Norway. “High oil prices are helping, because we’re getting more money for exploration.”
Exploration successes so far this year include the double Hades and Iris discovery that OMV AG made with a single well in the Norwegian Sea. Together, they have a mid-point estimate of more than 140 million barrels of gas and condensate. Wintershall AG, Aker BP and Equinor ASA, the biggest Norwegian oil company, have also made discoveries.
Explorers will drill about 25 wells in the North Sea and 10 each in the Norwegian Sea and Barents Sea, Stordal said. Given current oil-price forecasts, the NPD expects overall exploration activity to be maintained in 2019, he said.
To be sure, explorers are still far from replacing production of oil and gas, which reached about 1.5 billion barrels of oil equivalent in 2017. Output is expected to test records by 2023, thanks to new fields and efficiency gains, before it drops from about 2025.
Discoveries are also smaller than they used to be — even the frontier Barents Sea, thought to hold two-thirds of Norway’s undiscovered oil and gas, has failed to deliver giants like the North Sea’s Sverdrup, Troll or Statfjord.
But small discoveries can be profitable if they’re close to existing infrastructure. For example, Equinor expects to develop this year’s 25 million barrel Lille Prinsen discovery in the North Sea.
“It’s important to have a balanced approach to both prospects near infrastructure and frontier areas,” the NPD’s Stordal said.
© 2018 Bloomberg L.P