Resource 2016 report

Resource report

Professor Olav Hanssensvei 10 P O Box 600 NO-4003 Stavanger 2016 Telephone: +47 51 87 60 00 www.npd.no [email protected] Publisher: Norwegian Petroleum Directorate Professor Olav Hanssens vei 10 P O Box 600, NO-4003 Stavanger Telephone: +47 51 87 60 00 E-mail: [email protected]

English translation: Rolf E Gooderham 1. Introduction and summary 5 Photographs: MBMedia, Emile Ashley and archives Printed by: Kai Hansen, Stavanger ISBN 978-82-7257-215-9 2. Exploration on the NCS 10

3. Undiscovered resources 24

4. Full-cycle profitability of exploration 34

5. Player picture 40 Conversion tables 6. Geological mapping 48 1 scm of oil = 1 scm oe 1 scm of condensate = 1 scm oe 1 000 scm of gas = 1 scm oe 1 tonne of NGL = 1.9 scm of NGL = 1.9 scm oe

Gas 1 cubic foot 1 000 British thermal unit (Btu) 1 cubic metre 9 000 kcal 1 cubic metre 35.3 cubic feet

Crude oil 1 scm 6.29 barrels 1 scm 0.84 tonnes oe (toe) 1 tonne 7.49 barrels 1 barrel 159 litres 1 barrel/day 48.8 tonnes/year 1 barrel/day 58 scm /year

MJ kWh TCE TOE Scm Barrel natural gas crude oil

1 MJ, megajoule 1 0.278 0.0000341 0.0000236 0.0281 0.000176 1 kWh, kilowatt hour 3.60 1 0.000123 0.000085 0.0927 0.000635 1 TCE, tonne coal equivalent 29 300 8 140 1 0.69 825 5.18 1 TOE, tonne oil equivalent 42 300 11 788 1.44 1 1 190 7.49 1 scm natural gas 40.00 9.87 0.00121 0.00084 1 0.00629 1 barrel crude oil (159 litres) 5 650 1 569 0.193 0.134 159 1

See also the dictionary on the NPD website at http://www.npd.no/en/About-us/Information-services/Dictionary/

2 3 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

PREFACE

The Norwegian Petroleum Fifty-three companies were involved on the NCS at Directorate (NPD) presents 31 December 2015. That represents a doubling since 2000. updated estimates of Most of these companies are active in the exploration phase. undiscovered resources New players mean greater diversity, which means in turn that on the Norwegian conti- more and innovative ideas get tried out. This contributes nental shelf (NCS) at regular overall to further discoveries and enhanced value. intervals. These also occupy an important place in this An important part of our work is to map unopened areas year’s report. Our previous of the NCS in order to increase understanding of and know- review of undiscovered ledge about the geology of these areas. Our commitment in resources on the NCS is recent years has primarily been directed at data acquisition three years old. Fifty-seven from Barents Sea North and Barents Sea North-East, towards discoveries have been made the boundary with Russia. During the summer of 2015, for since the resource report example, shallow wells were drilled east and north of Kvitøya. in 2013. At the same time, Results from these will be important for understanding the changes to our overall estimate of undiscovered resources geology and resource potential in Barents Sea North, includ- are insignificant. A slight decline in the North and Norwegian ing the area adjacent to the boundary with Russia. Work is Seas is outweighed by a higher estimate for the Barents Sea. now under way to interpret the data we have acquired in That largely reflects the geological information provided by recent years. exploration results in recent years. Exploration is learning, and it takes time to learn. We are now Fifty years have passed since the first exploration well was in a period where the industry faces major challenges. Main- spudded on the NCS. Since then, roughly 100 fields have taining a long-term perspective is important at such times. been brought on stream, jobs have been generated and value The purpose of this report is to provide greater understand- creation for society has been huge. Forty-seven per cent of ing of the resource base on the NCS, and thereby contribute the total expected resources have so far been produced, and to good choices of direction for future value creation. undiscovered resources amount to 20 per cent. This means that much remains to be found, and that the basis exists for continued production over many decades.

Most of the discoveries made since the 2013 resource report are located close to existing infrastructure, and can be developed simply and cost-effectively through tie-backs to such facilities as platforms and transport networks. That applies particularly to the discoveries in the North Sea and mature parts of the Norwegian Sea, and underlines the importance of exploring in these areas. That discoveries are still being made after 50 years of exploration activity under- pins the continuing attractiveness of NCS as a petroleum Sissel Eriksen province. Each exploration well provides more knowledge Exploration director about and a basis for enhanced understanding of the geology and resource potential of the continental shelf.

To make discoveries, wells must be drilled. The level of activity has been high over the past decade, with an annual average of 40 exploration wells. No less than 56 were spudded in 2015, and about 30 are expected in 2016.

We have conducted an analysis of the full-cycle profitability of exploration in 2000-14, which shows that this activity paid off in socio-economic terms in every part of the NCS during the period. Our calculations indicate that the greatest value creation has clearly taken place in the North Sea, since the levels of exploration activity and investment have been highest there. Access to infrastructure, as in the North Sea, also boosts profitability. Exploration creates great value for society in the Norwegian and Barents Seas, too. In the longer term, new discoveries which contribute to infrastructure development in these regions will lay the basis for a level of value creation similar to that in the North Sea.

2 3 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

A bronze model of the Ekofisk field forms part of the decoration in the Norwegian Petroleum Directorate’s offices at Ullandhaug in Stavanger. 4 5 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

INTRODUCTION

The purpose of the 2016 resource report is to detail the status of, facts about and analyses concerning exploration developments on the NCS, and to present an updated estimate for undiscovered resources.

The 2016 resource report has three main messages:

• Exploration activity has been high over the past decade, and a number of large discoveries have been made. Resour- ce growth from exploration represents substantial value for Norwegian society. • The level of exploration activity must remain high if undiscovered resources are to help maintain production from around 2025 and create value both for the industry and for society in a long-term perspective. • The total remaining resources can provide a basis for oil and gas production over many decades to come. That view is supported by the updated estimate for undiscovered resources. The first NCS map, 1965.

Number of Oil price, exploration and technology development were postponed, exploration wells USD/barrel and many employees made redundant. Companies merged 70 140 and their diversity was reduced. 60 120 50 100 The low level of exploration activity prompted the goverment 40 80 to adopt targeted measures to encourage competition 30 60 and increase diversity on the NCS. Three adjustments to 20 40 operating parameters were particularly important – the 10 20 prequalification of new companies, annual licensing rounds 0 0 with awards in predefined areas (the APA scheme), and refunding the tax value of exploration expenses. Combined 1974 2014 1970 1978 2010 1982 1998 1986 1994 1990 1966 2002 2006 with rising oil prices, these steps led to a sharp increase in Real oil price (2015) Exploration wells exploration activity. New companies became involved, and a Nominal oil price number of profitable discoveries were made.

Figure 1.1 Exploration wells spudded and oil prices, historical. Cost reductions Sources: BP, Thomson Reuters and EIA Partly because the level of activity was high, costs eventually rose steeply. Measures were therefore adopted This year marks the 50th anniversary of the first wildcat to reduce them and limit capital spending. A big fall in oil spudded on the NCS. The first commercial petroleum deposit, prices from the late autumn of 2014 made that even more Ekofisk, was discovered in late 1969. Once the size of that necessary. Drilling rigs are now being laid up, investment is field had been grasped, it became very attractive for the being postponed and workforces are being downsized. A oil companies to explore the NCS and a number of major substantial decline in the number of exploration wells is discoveries were made over the following decade. expected in 2016.

In the course of the 50 years since the first wells were drilled, Lower prices give the whole industry a strong incentive to oil prices have fluctuated considerably. That has also affected work more efficiently and to be innovative. That will be the level of activity in the industry (figure 1.1). significant for the competitiveness of the NCS and for achieving good resource management. However, it is Targeted measures important that cost-cutting efforts do not lead to the loss Exploration activity declined in the wake of relatively low oil of resources and value, but aim at long-term measures which prices during the late 1990s, and the low point was reached enhance industry efficiency. in 2005 with 12 wells spudded. Long-term projects such as

4 5 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Solid resource base Prices – very significant for exploration and recovery Total expected recoverable resources were estimated at The future development of oil and gas prices will be very 31 December 2015 to be 14.2 billion standard cubic metres of significant for exploration activities, the development of oil equivalent (scm oe) (figure 1.6 and table 1.1). Of this amount, discoveries and how much of the resources will be 6.6 billion scm oe has been produced. After 45 years of commercial. These trends are governed by conditions external petroleum production, more than half the estimated resources to Norway. What the players – both companies and remain to be recovered. government – can do something about is to contribute actively to optimising the efficiency of exploration and Oil production has historically been larger than gas output recovery on the NCS. Improved productivity and lower unit (figure 1.2). This position has been reversed over the past five costs could help to sustain activity, production and value years. Gas revenues outstripped income from oil for the first creation for a long time to come. time in 2015. Long-term perspective Forty-one per cent of the remaining estimated resources are The NPD takes the view that the total remaining resources classified as reserves and 38 per cent as undiscovered (figure provide a basis for continued Norwegian oil and gas produc- 1.3). Contingent resources in fields and discoveries account for tion over many decades to come (figure 1.4). the remainder. Gas represents more than half the remaining resources. Undiscovered resources will represent an increasing share of annual output from 2025. Substantial undiscovered 200 resources remain to be found. Oil 180 Gas 160 NGL If these are to help sustain production, a high level of Condensate 140 exploration activity must be maintained. Many years can pass 120 before a discovery comes on stream. Exploration activity over 100 the next few years will therefore be important for reducing the 80 decline in production.

Million smc oe 60 40 20 300 0 250 1974 2014 1970 1978 2010 1982 1998 1986 1994 1990 2002 2006 200 per year Figure 1.2 Production from the NCS, historical. 150

100 2000 Liquid Million smc oe 1800 50 Gas 1600 0 1400 2010 1970 2020 2030 1980 1990 2000 1200 Historic Resources in discoveries 1000 Reserves Undiscovered resources 800 Resources in elds Million smc oe 600 400 Figure 1.4 Historical and expected production from the 200 NCS. 0 Reserves Contigent Contigent Undiscovered resources resources resources in elds in discoveries Figure 1.3 Estimated remaining petroleum resources at 31 December 2015.

6 7 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

SUMMARY

Chapter 2: Exploration on the NCS Chapter 6: Geological mapping Exploration activity is essential if undiscovered resources are Geological mapping by the NPD in unopened and frontier to contribute to production and create value both for the areas of the NCS helps to enhance understanding of their industry and for society. Through its exploration policy, the geology and to expand data coverage. Funds for this work government gives companies access to exploration acreage are provided over the government budget. in both mature and frontier areas. A high level of exploration activity on the NCS since 2005 has resulted in a number of profitable discoveries.

Chapter 3: Undiscovered resources The updated estimate for undiscovered resources confirms that total remaining resources provide the basis for oil and gas production over many decades to come. It is roughly the same as the previous estimate in 2013. Total undiscovered resources are put at 2 920 million scm oe. About half of this amount lies in the Barents Sea, where the biggest change has occurred in the estimate. It has increased by about 125 million scm oe for this area.

Chapter 4: Full-cycle profitability of exploration Exploration contributed substantial value to society between 2000 and 2014, according to the NPD’s analysis of its profitabi- lity during this period.

Overall net cash flow from discoveries made in these years is estimated at roughly NOK 2 000 billion after deducting exploration costs.

The analysis shows that exploration made a positive contri- bution to value creation in all parts of the NCS. Both activity and resource growth have clearly been greatest in the North Sea, with Johan Sverdrup as the biggest contributor to value creation. Exploration in the Norwegian and Barents Seas has also generated substantial value.

Chapter 5: Player picture A player picture which reflects the challenges facing the industry in both mature and less mature areas is important for realising the resource and value potential.

Companies involved in the exploration phase today display considerable diversity. The result has been a high level of activity, increased competition and a greater variety of ideas, which have yielded many discoveries and created substantial value for society.

It is important that the companies participate actively in the exploration phase and contribute expertise and capital. The NPD’s analysis of the part played by the various company constellations shows that they have all made a positive contribution to exploration, resource growth and value creation.

Getting more companies involved in the exploration phase has also increased the number of operators for discoveries and fields. While eight companies were operators for producing fields in 2000, this had risen to 15 in 2015.

6 7 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Undiscovered 8 resources Prospects Leads and unmapped resources

Contingent 7F resources New discoveries that have not been evaluated Reserves Historical production 6 5F 4F 3F 2F 1 0 Recovery Recovery In the Decided Approved Sold and not very likely, planning by the plan for In delivered likely but not phase licensees development production petroleum clari ed and operation 5A 4A 3A 2A

7A Possible future measures to improve recovery

Figure 1.5 Classification of resources by the NPD.

Resource accounts at 31 December 2015 representing the expected value (figure 1.6). The amount sold The NPD’s resource accounts provide an overview of total and delivered totals 6.6 billion scm oe (47 per cent). Roughly expected recoverable petroleum resources, including those 54 per cent of total recoverable resources have been produced remaining to be discovered, and form the basis for the so far if the lower part of the uncertainty range is applied, but production forecast in figure 1.4. They incorporate resources only 38 per cent with the upper part. from the whole NCS, with the exception of the new Barents North-East area defined by the boundary treaty between Remaining resources are estimated to be 7.6 billion scm oe, Norway and Russia. including 3.1 billion scm oe (41 per cent) as reserves (table 1.1). Contingent resources in fields and discoveries, including These accounts build on data reported by the operators as possible future measures for improving recovery, represent well as the NPD’s own assessments of fields and discoveries 20 per cent of expected remaining resources. and its estimate of undiscovered resources. They are based on the NPD’s resource classification. All petroleum quantities can The undiscovered portion represents about 20 per cent of be related to a project, and the classification reflects the expected total resources on the NCS, and 38 per cent of maturity of each project. The various resource classes are expected remaining resources. presented in figure 1.5, with arrows showing how the projects can be matured. Further details can found at www.npd.no.

At 31 December 2015, total recoverable resources were estimated to lie within an uncertainty range (P10 and P90) from 12.2 to 17.2 billion scm oe, with 14.2 billion scm oe

Total recoverable resources

Project category Oil mill scm Gas bn scm NGL mill Condensate Total mill tonnes mill scm scm oe Sold and delivered 4075 2100 179 114 6630 Reserves 1023 1856 116 28 3128 Contingent resources in fields 328 222 22 2 594 Contingent resources in discoveries 375 323 15 13 739 Possible future measures to improve recovery 155 60 215 Undiscovered resources 1315 1484 120 2920 Total resources 7272 6047 333 277 14227 Total remaining resources 3196 3746 153 163 7597

Table 1.1 Resources accounts at 31 December 2015.

8 9 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

RESOURCE ACCOUNTS

12

10.5 Total resources: 10 14.2 billion scm oe 20% 8 7.6

5% 6 47% 5.5 5.4 5.2 6% 4 3.9 3.7 3.0 2.5 2 22% Billillion scm oe

0 Total Gas Liquid 2.1 Undiscovered resources Contingent resources in discoveries -2 4.5 Contingent resources in elds 6.6 Reserves -4 Sold and delivered

-6

-8

Figure 1.6 Distribution of total recoverable resources and uncertainty in the estimates at 31 December 2015.

The NPD’s core store contains rock samples from virtually all the wells on the NCS.

8 9 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Somewhat younger versions of two NPD geologists, Bernt Egeland (left) and Harald Brekke (centre). Svein Johnsen, on the right, is no longer with the NPD.

10 11 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

CHAPTER 2

Exploration on the NCS

Exploration activity is essential if undiscovered resources are to contribute to production and create value both for the industry and for society.

Through its exploration policy, the government gives companies access to exploration acreage in both mature and frontier areas. A high level of exploration activity on the NCS since 2005 has resulted in a number of profitable discoveries.

10 11 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

-50° -40° -30° -20° -10° 0° 10° 20° 30° 40° 50° 60° 70°

Open for petroleum activity Open, special schemes, see WP no 28 (2010 – 2011) 80° Awards in prede ned areas (APA) Assumed maximum extent of sedimentary rocks which may contain petroleum ARCTIC OCEAN Limits of the NCS according to the UN Convention on the Law of the Sea

70° Svalbard Greenland

75° BARENTS SEA NORTH

Jan Mayen BARENTS SEA SOUTH

65° 70° Iceland

NORWEGIAN SEA Russia 65°

60° Faeroe Islands Finland Sweden Shetland

Norway

60° NORTH SEA 55° Great Britain

Denmark

0° 10° 20° 30°

Figure 2.1 Status of NCS.

12 13 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

39% 34%

The NCS covers about 2 040 000 square Non-sedimentary rock Awarded area 6% kilometres and is six times larger than Open for petroleum activity - not awarded 21% mainland Norway. Two-thirds of this area Not opened for petroleum 39% 34% activity could contain sedimentary rocks with Non-sedimentary rock a potential for petroleum. Awarded area 6% Open for petroleum activity - not awarded 21% The areas currently opened for exploration amount to FigureNot 2.2 opened Area status for petroleum in per cent. activity 570 000 sq.km, with some 130 000 sq.km awarded as production licences – in other words, six per cent of the whole NCS and 10 per cent of the area with sedimentary rocks (figures 2.1 and 2.2).

With certain exceptions, the North and Norwegian Seas and In the areas opened to the petroleum industry, oil companies Barents Sea South have been opened for petroleum activiti- can gain access to acreage either by applying for production es. The unopened sections are parts of Skagerrak and areas licences in licensing rounds or by buying or swapping interests off Trøndelag, Nordland, Lofoten, Vesterålen, Senja and Jan in such licences. Mayen, as well as Barents Sea North and the Arctic Ocean. An extensive set of policy instruments has been developed on The NCS has been opened for petroleum activities gradually. the NCS to take account of other industries and the environ- Oil companies were invited to apply for a total of 278 North ment in all phases, from the opening of new areas, through Sea blocks in the first offshore licensing round during 1965. awards, exploration, development and production, Seventy-eight blocks were licensed, the largest single set of to decommissioning. awards on the NCS (figure 2.3). Licensing rounds Information about and knowledge of geological conditions in Two types of licensing round with equal status are conducted the North Sea were used when awarding the first blocks in the on the NCS. Awards in predefined areas (APA) cover Norwegian and Barents Seas during 1980. Between 1981 and mature areas, while numbered rounds concentrate on frontier 1989, more areas in these two regions were made available for areas. Mature areas are characterised by known geology and petroleum operations through step-by-step announcements well-developed or planned infrastructure. They usually offer and awards. a greater probability of making discoveries than frontier areas, where geological knowledge is more limited and infrastruc- Deepwater areas in the Norwegian Sea and parts of the Nord- ture lacking. Frontier areas are likelier to yield large land VI area off Lofoten were opened for petroleum activities discoveries than mature ones. in 1994. Two decades then passed before Barents Sea South- East was opened in 2013.

140 Acreage available for application but not awarded – NSA/APA 120 Acreage available for application but not awarded – numbered rounds Seismic survey areas awarded Acreage awarded – NSA/APA 100 Acreage awarded – numbered rounds

80

60

40 Acreage 000 (1 sq.km)

20

0 BS1997 APA2014 APA2011 APA2010 APA2012 APA2013 APA2015 APA2007 APA2003 APA2005 APA2008 APA2009 APA2006 APA2004 NSA1999 NSA2001 NSA2002 NSA2000 1st round 5th round 5th 4th round 4th 6th round 6th 7th round 7th 8th round 8th 3rd round 3rd round 9th 2nd round 2nd 21st round 21st 11th round 11th 17th round 17th 14th round 14th 16th round 16th 15th round 15th 13th round 13th 12th round 12th 18th round 18th 10th round 10th 20th round 20th 19th round 19th 23rd round 23rd 22nd round 22nd Figure 2.3 NCS acreage put on offer and awarded at 1 March 2016.

12 13 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Increased availability of acreage has led to more licence Acreage covered by the APA has been extended every year awards (figure 2.4). Over the past 15 years, the government since the scheme began in 2003 (figure 2.5). has strengthened the predictability of the allocation system by holding APA rounds annually, while the numbered rounds The area put on offer in the APA rounds is still attractive to the generally take place every other year. In addition, the compa- oil companies. That was demonstrated by the 2014 and 2015 nies know in advance which principles govern the kind of rounds, when applications were received from 47 and acreage included and the general work commitments for 43 companies respectively. production licences in the APA rounds compared with the numbered ones. Numbered rounds Numbered rounds are generally announced every other year. A sequential approach forms an important part of the Licences awarded since 2000 exploration strategy for licensing rounds in frontier areas. 0 10 20 30 40 50 60 70 80 This means that the results obtained from wells in one locality 2000 16th round 2001 NSA2000 should be evaluated before further drilling is conducted in 2002 17th round NSA2001 the same area. That ensures available information is applied in 2003 NSA2002 APA2003 2004 18th round APA2004 further exploration. 2006 19th round APA2005 2007 APA2006 2008 APA2007 The number of awards has varied since 2000, from six in the 2009 20th round APA2008 2010 APA2009 17th round to 24 in the 22nd (figure 2.4). 2011 21st round APA2010 2012 APA2011 2013 22nd round APA2012 Parts of Barents Sea South-East, which was opened for explo- 2014 APA2013 ration in 2013, are included in the 23rd round. The latter covers 2015 APA2014 2016 APA2015 57 full or part blocks, including 34 in Barents Sea South-East, 20 in the rest of the Barents Sea and three in the Norwegian Figure 2.4 Awards since 2000 by licensing round. North Sea Sea. At the deadline of 2 December 2015, applications had awards (NSA) were introduced in 1999 as a predecessor of the been received from 26 companies. The government aims to APA. award new production licences before the summer of 2016.

As figure 2.4 shows, the largest number of awards has been Total resource growth from discoveries in numbered and made in the APA rounds. Since these cover areas with known annual APA rounds has been roughly the same since 2000 geology and well-developed infrastructure, they generate (figure 2.6). more applications than the numbered rounds. Opportunities to develop smaller discoveries through tie-ins to existing infra- structure have made the APA rounds especially attractive to new players on the NCS, particularly the smaller companies.

1800 Frontier areas are investigated gradually through sequential 1600 exploration. New licence awards in the numbered rounds are NSA/APA 1400 Numbered rounds generally limited to a small number of key blocks. 1200

Many applications have been received and a lot of licences 1000 awarded since 2000. The APA 2013 round generated the 800 greatest number of awards during this period, with 65 pro- 600 duction licences allocated, closely followed by the APA 2011 400 and 2006 rounds with 60 and 58 awards respectively (figure 200 2.4). 0

Accumulated resources in million scm oe 2000 2002 2004 2006 2008 2010 2012 2014 APA rounds The APA scheme is intended to secure efficient exploration Figure 2.6 Accumulated resource growth by licensing rounds of mature areas and to prove time-critical resources close to (2000-15). existing and planned infrastructure. It is also important that known areas are re-examined with fresh eyes and that new idea are tested. The Johan Sverdrup discovery in a previously well-explored area provides an example of this. Most of the discoveries in mature areas are otherwise expected to be small. To make them worth developing, they will usually need to be tied back to an existing field. Infrastructure has a limited lifespan, which makes it important to prove nearby resources in good time before existing fields shut down.

14 15 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

2° 4° 6° 8° 18° 20° 22° 24° 26°

62° 62°

72° 72°

Bergen 71° 60° 71° 60°

Hammerfest

Stavanger 20° 22° 24° 26°

2° 4° 6° 8° 10° 12° 58° 58°

66° 66°

56° 56°

2° 4° 6°

APA 2003 APA 2011 APA 2004 APA 2012 APA 2005 APA 2013 64° APA 2006 APA 2014 64° APA 2007 APA 2015 APA 2008 APA 2016 APA 2010 Trondheim

Figure 2.5 Expansion of acreage included in the APA. 4° 6° 8° 10° 12°

14 15 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Exploration activity

Exploration wells Various definitions The level of exploration activity measured by the number of wells drilled has varied considerably since 1966 (figure 2.7). It Exploration well is the collective term for wildcats and was high in the 1980s, with up to 50 wells per year, while only appraisal wells. 12 were drilled in 2005. But activity recovered from 2006 and reached a record 65 wells spudded in 2009. The level has been Wildcat is the first well drilled on a new, clearly defined high since then, with more than 40 wells drilled per annum in geological structure (prospect). 2009-15. Fifty-seven and 56 wells were spudded in 2014 and 2015 respectively. Exploration activity has always been highest Appraisal well is a well drilled to determine the extent and in the North Sea (figure 2.8). About 30 wells are planned across size of a discovery. the NCS in 2016, partly reflecting the decline in oil prices.

Discovery. One or more deposits identified collectively in the same well which, through testing, sampling or logging, are established as likely to contain mobile petroleum. This 70 definition covers both commercial and technical deposits. Appraisal wells A discovery acquires the status of a field or becomes in- 60 Wildcats corporated in an existing field when a plan for develop- 50 ment and operation (PDO) is approved by the government. 40 Technical finding rate.The relationship between technical 30 discoveries made and wildcats drilled. 20

10 Commercial finding rate.The relationship between discoveries currently under development or declared

Number of exploration wells (spudded) wells exploration of Number 0 commercial and wildcats drilled. 1974 1970 2014 1978 2010 1982 1986 1998 1990 1994 1966 2002 2006

Figure 2.7 Exploration wells spudded per year (1966-2015).

70 35 Barents Sea Barents Sea 60 Norwegian Sea 30 Norwegian Sea North Sea North Sea 50 25

40 20

30 15

20 10 Number of discoveries

10 5

Number of exploration wells (spudded) 0 0 1974 2014 1970 1978 2010 1982 1998 1986 1994 1990 1966 2002 2006 2011 2015 1975 1971 1979 1991 1967 1987 1983 1995 1999 2007 2003

Figure 2.8 Exploration wells spudded per year by NCS region Figure 2.9 Discoveries per year by NCS region (1967-2015). (1966-2015).

Discoveries The high level of exploration activity has yielded many With few exceptions, the largest discoveries were made early discoveries. Viewed overall, the greatest proportion of these in the exploration of the NCS (figure 2.10). A substantial one are in the North Sea. For the first time, however, the Barents was again made in 2010, when Johan Sverdrup ranked among Sea accounted for the largest number of finds and the biggest the world’s biggest finds that year. Two considerable oil disco- resources proven in 2014. Nine discoveries were made that veries were made during 2011 and 2012 in an area north-west year in this region, eight in the North Sea and five in the of Snøhvit in the Barents Sea. Designated 7220/8-1 (Skrugard) Norwegian Sea. Nothing was found in the Barents Sea during and 7220/7-1 (Havis), these now form part of Johan Castberg. 2015, but 10 discoveries were made in the North Sea and six in the Norwegian Sea (figure 2.9).

16 17 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

12000 Johan Barents Sea Castberg to delineate Johan Sverdrup. An oil discovery – 16/4/6 S (Luno 10000 Norwegian Sea II) – was also made in this area. North Sea Ormen Lange Norne 8000 Johan Four discoveries were made about 25 kilometres south-west Heidrun Sverdrup of Oseberg South in 2013 and 2014 – 30/11-8 A, 30/11-10 6000 Troll øst (Krafla North), 30/11-9 S (Askja) and 30/11-9 A (Askja East). Troll vest During 2011, 30/11-8 S (Krafla) was found in the same area. 4000 Snorre Gullfaks Collectively, these discoveries proved over 30 million scm oe, 2000 Statord Sleipner and further prospects are due to be drilled in the area during Eko sk 2016. Results so far show that the well-explored section of the 0 North Sea continues to provide good opportunities for value 2011 2013 2015 1975 1971 1979 1981 1973 1991 1977 1967 1987 1997 1993 1983 1985 1995 Accumulated growth in resources in million scm oe 1969 1989 1999 2001 2007 2003 2005 2009 creation.

Figure 2.10 Accumulated resource growth by NCS region (1967- The biggest discovery on the NCS in 2015 was made by well 2015). 2/4-23 S (Julius), where about seven million scm oe of gas and condensate were proven. This well also delineated the 2/4-21 (King Lear) gas and condensate discovery made in 2012. North Sea Plans call for 15-20 exploration wells in the North Sea during Exploration since 2000 2016. About 170 production licences were awarded in the Norway’s North Sea sector is the best-explored part of the APA rounds during 2013-15. That could help to maintain NCS, and the largest proportion of its resources have been exploration activity in the years to come. proven there. After more than 50 years of activity and over 1 140 completed exploration wells at 31 December 2015, many discoveries are still being made.

50 Appraisal wells Proving resources close to existing and planned infrastruc- 45 Wildcats ture represents one of the main challenges in the North Sea. 40 Finding additional resources while the big facilities are still 35 on stream is important. Even very small discoveries can be 30 profitable if existing infrastructure can be utilised effectively. 25 Phasing discoveries into fields on stream also helps to extend 20 the producing life of the latter, and thereby maintains their 15 profitable production and improves recovery from them. 10 5 0

Relatively few wells were drilled in the North Sea from 2000 (spudded) wells exploration of Number 2000 2002 2004 2006 2008 2010 2012 2014 to 2005 (figure 2.11). However, their number rose substantially Figure 2.11 Exploration wells spudded per year in the North from 2005 and peaked in 2009 at 47. Exploration activity has remained high since 2010, with an annual average of 34 wells. Sea (2000-15).

A total of 127 discoveries have been made since 2000 (figure 2.12). 25

The finding rate in the North Sea has been relatively high over 20 the same period, averaging 0.2-0.7 per annum (figure 2.13). 15 Resource growth since 2000 has been highest in the North Sea, but most of the discoveries are small (figure 2.14). It 10 peaked in 2008-11 at about 600 million scm oe, largely thanks

to the discovery of Johan Sverdrup. Number of discoveries 5

0 Exploration for the past three years 2000 2002 2004 2006 2008 2010 2012 2014 Since the NPD’s previous resource report in 2013, 114 explo- ration wells have been spudded and 25 discoveries made. All Figure 2.12 Discoveries per year in the North Sea (2000-15). the latter are small and close to fields, and many of these are commercial.

Exploration activity in 2013 was at its highest around the southern end of the Utsira High. Most of the wells were drilled

16 17 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

35 0.8 of 0.25-1.00 (figure 2.17). Resource growth in this region has varied (figure 2.18), and was greatest in 2008-11 at roughly 30 0.7 160 million scm oe. That increase related primarily to Maria 0.6 25 and the 6506/9-2 S (Fogelberg), 6507/7-14 S (Zidane) and 0.5 20 6705/10-1 (Asterix) discoveries. 0.4 15 Exploration for the past three years 0.3 Since the NPD’s previous resource report in 2013, 42 explora-

10 Discovery success Number of wildcats of Number 0.2 tion wells have been spudded and 18 discoveries made. The 5 0.1 most interesting lies south-west of Njord, where oil and gas 0 0 were proven by well 6406/12-3 S (Pil) in the Jurassic Rogn and 2000 2002 2004 2006 2008 2010 2012 2014 Melke formations. Discovery Yearly discovery success Dry well Discovery success (last 5 years) Exploration activity in deep water has been low over the past three-four years, with all the wells drilled in the Vøring Basin. Three wildcats were completed in 2015 close to the Aasta Figure 2.13 Completed wildcats and finding rate in the North Sea Hansteen field to prove more gas. Gas and a four-metre (2000-15). oil column were proven in 6706/12-2 (Snefrid North), while 6706/12-3 (Roald Rygg) and 6706/11-2 (Gymir) yielded small 700 gas discoveries. These finds are being assessed for tie-back <5 mill scm oe to Aasta Hansteen, together with others in the area. Further 5-10 mill scm oe 600 discoveries in the Norwegian Sea during this period are small, 10-50 mill scm oe 38 with a number of them close to fields. >100 mill scm oe 500 12 One-two exploration wells are planned in the Norwegian Sea 5 during 2016. 400

300 Million scm oe

200 1 20 100 24 Appraisal wells 17 18 2 15 2 Wildcats 4 2 5 16 0 14 2000-2003 2004-2007 2008-2011 2012-2015 12 10 Figure 2.14 Resources in discoveries by discovery size in four-year 8 periods, North Sea (2000-15). Number of finds specified in the 6 columns. 4 2 0

Number of exploration wells (spudded) wells exploration of Number 2000 2002 2004 2006 2008 2010 2012 2014 Norwegian Sea Figure 2.15 Exploration wells spudded per year in the Norwegian Exploration since 2000 Sea (2000-15). The level of exploration activity has varied a great deal since 2000 (figure 2.15). It was relatively high during the first two years of this period, with nine and 13 wells respectively, and 12 low for the next four. Only three wells were drilled in 2005. But activity rose from 2006 and set a record in 2009 with 10 18 spudded wells. It then slowed, averaging 10 wells a year. Exploration was high again in 2015, with 16 wildcats spudded 8

– the largest number since 2000. Most wells are drilled in the 6 mature areas on the Halten and Dønn Terrace. Priority has been given to drilling prospects close to existing infrastruc- 4 ture. Number of discoveries 2

Seventy-four discoveries have been made since 2000 (figure 0 2.16). As in the North Sea, the finding rate in the Norwegian 2000 2002 2004 2006 2008 2010 2012 2014 Sea has been high over the past 15 years, with an annual rate Figure 2.16 Discoveries per year in the Norwegian Sea (2000-15).

18 19 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

18 1 10 16 0.9 9 0.8 14 8 0.7 12 7 0.6 10 6 0.5 8 5 0.4 4 6 0.3 Discovery success 3 Number of wildcats of Number 4 0.2 Number of discoveries 2 2 0.1 1 0 0 0 2000 2002 2004 2006 2008 2010 2012 2014 2000 2002 2004 2006 2008 2010 2012 2014 Discovery Yearly discovery success Dry well Discovery success (last 5 years) Figure 2.20 Discoveries per year in the Barents Sea (2000-15).

Figure 2.17 Completed wildcats and finding rate in the Norwegian Sea (2000-15). Although petroleum operations have been pursued in the Barents Sea for more than 30 years, only two fields are on 180 stream – the Snøhvit gas development from 2007 and the <5 mill scm oe Goliat oil field since March 2016. 160 5-10 mill scm oe 10-50 mill scm oe 140 >100 mill scm oe 18 Both oil and gas were found during 2000 in 7122/7-1 (Goliat), which lies in the boundary zone between the Hammerfest 120 Basin and the Finnmark Platform. The government sus- 4 pended petroleum activities in the Barents Sea in 2001 to 100 await the impact assessment for year-round petroleum 80 10 activities off Lofoten and in the Barents Sea. In December 2 16 Million scm oe 2003, the government resolved to continue petroleum 60 6 operations in those parts of the Barents Sea already opened for such activities. Following this resumption, oil was proven 40 6 5 3 1 in the Triassic by 7122/7-3 (Goliat) and interest in the Barents 20 Sea increased. Before this discovery, the Upper Jurassic 1 2 (Hekkingen formation) was the only confirmed source rock 0 2000-2003 2004-2007 2008-2011 2012-2015 in the Barents Sea. The Goliat well also revealed that Lower and Middle Triassic organic shales are effective source rocks, Figure 2.18 Resources in discoveries by discovery size in four-year which opens opportunities for making further commercial periods, Norwegian Sea (2000-15). Number of finds specified in the discoveries. columns. The 7220/8-1 (Skrugard) and 7220/7-1 (Havis) discoveries were Barents Sea made in 2011-12. The first of these proved oil and gas in Middle and Lower Jurassic reservoir rocks and represented Exploration since 2000 the biggest discovery in the Barents Sea since Goliat in 2000. A total of 71 exploration wells have been spudded since 2000, Also proving oil and gas, the 7220/7-1 (Havis) well was drilled including 55 wildcats, with 30 discoveries made (figures 2.19 about seven kilometres to the south-west of 7220/8-1 (Skru- and 2.20). gard) and 100 kilometres north of Snøhvit. Now included in Johan Castberg, these two discoveries opened a new oil pro- vince in the Barents Sea. The success continued with 7324/8-1 14 (Wisting) in the Hoop area on the Bjarmeland Platform to the Appraisal wells north-west, which proved oil in a very shallow Jurassic reser- 12 Wildcats voir only 250-300 metres beneath the seabed. 10 8 Wells drilled during 2013-14 in previously explored areas on 6 the Loppa High led to the 7120/1-3 (Gohta) and 7220/11-1 (Alta) discoveries. 4 2 Resource growth has increased substantially since 2008, with 0 the biggest rise in 2012-15 (figure 2.21). During this four-year

Number of exploration wells (spudded) wells exploration of Number 2000 2002 2004 2006 2008 2010 2012 2014 period, the 7120/1-3 (Gohta), 7220/11-1 (Alta), 7220/7-1 Johan Figure 2.19 Exploration wells spudded per year in the Barents Sea (2000-15).

18 19 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Castberg and 7324/8-1 (Wisting) discoveries made the biggest 180 <5 mill scm oe contributions to resource growth. 9 160 5-10 mill scm oe 10-50 mill scm oe 3 The finding rate has varied over the past 15 years (figure 2.22). 140 >100 mill scm oe It has been relatively high for the past five years. 120

Exploration for the past three years 100 4 Since the NPD’s previous resource report in 2013, 30 explora- 1 tion wells have been spudded and 14 discoveries made. Drilled 80

in 2013, the 7120/1-3 (Gohta) well proved oil in Permian carbo- Million scm oe 4 60 nate rocks. Mobile oil had not previously been found in such 2 3 rocks in Norway’s Barents Sea sector. The find was delineated 40 in 2014, and further appraisal is planned. 20 1

The 7220/11-1 (Alta) discovery (figure 2.23) was the largest on 0 3 the NCS in 2014, and one of the biggest in the world that year. 2000-2003 2004-2007 2008-2011 2012-2015 It lies north of the Snøhvit area and contains oil in rocks which include carbonates in the Permian Gipsdalen group. Formation Figure 2.21 Resources in discoveries by discovery size in four-year tests show a reservoir with good flow properties. Estimated to periods, Barents Sea (2000-15). Number of finds specified in the contain roughly 36 million scm oe, the discovery was ap- columns. praised by four wells in 2015. Results from these are important for further exploration. 14 1 0.9 12 Six wildcats have been drilled in the Hoop area, yielding four 0.8 discoveries. The first well, 7324/8-1 (Wisting), proved an oil 10 0.7

column 50-60 metres thick in 2013 at a very shallow reservoir 8 0.6 level in the Jurassic Realgrunnen sub-group. Well 7324/7-2 0.5 (Hanssen) was drilled in 2014 just north of “Wisting” and 6 0.4 proved oil in the Jurassic Stø formation. 0.3 4 Discovery success Number of wildcats of Number 0.2 2 Made in 2014, the northernmost discovery on the NCS is 0.1 7325/1-1 (Atlantis). This small gas deposit in Upper Triassic 0 0 rocks lies about 360 kilometres north of Hammerfest. North- 2000 2002 2004 2006 2008 2010 2012 2014 west of the Johan Castberg area, 7319/12-1 (Pingvin) proved Discovery Yearly discovery success gas in a 15-metre column in the Palaeocene Torsk formation. Dry well Discovery success (last 5 years) The discovery was made in a less explored area in a previously unconfirmed play. Figur 2.22 Completed wildcats and finding rate in the Barents Sea The good drilling results in recent years have boosted interest (2000-15). in Barents Sea exploration. Ten and 13 wells were drilled in 2013 and 2014 respectively – the largest numbers on an annual basis in this region. The figure for 2015 was seven, with four of these being appraisal wells on the “Alta” discovery.

Eight to 10 exploration wells are planned in the Barents Sea during 2016.

20 21 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

Liquid Gas Production licences

! ! 7324/2-1 (Atlantis)

! !! 7324/7-2 (Hanssen) ! ! ! 7324/8-1 (Wisting) ! ! ! ! 7319/12-1 (Pingvin) ! ! ! !!

! !

! ! ! ! !! ! ! 7220/8-1 Johan Castberg! ! ! ! ! ! ! ! ! ! ! ! ! !

! ! ! 7220/11-1! (Alta) ! ! ! ! ! ! ! !! ! 7120/1-3 (Gohta) !! ! ! ! ! ! ! ! ! ! ! ! ! ! ! Snøhvit! ! ! ! ! ! ! ! ! ! ! ! Goliat !! ! ! !! ! ! ! ! ! ! ! ! ! ! ! !

Hammerfest

Vadsø

Kirkenes

Figure 2.23 Discoveries in the Barents Sea.

20 21 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Those who seek, find

Areas around “Alta” and “Gohta” Many of the areas where exploration is being conducted today More than 20 years after the initial awards in the area, three have been awarded and relinquished several times. New new licences were allocated in the 2006 and 2007 APA rounds. technology, new and better seismic surveys and innova- Discoveries were made in production licences (PLs) 438 and tive thinking and ideas among the oil companies mean that 492 – the small 7120/2-3 S (Skalle) gas deposit and the 7120/1-3 substantial petroleum resources are being proven in acreage (Gohta) oil and gas find respectively. The latter contains gross explored several times. A series of examples include Johan oil and columns of about 75 and 25 metres respectively in Sverdrup, 35/9-7 (Skarfjell), 6406/12-3 S (Pil), the Johan Castberg carbonate rocks of the Røye formation. Several new licences discoveries, 7220/11-1 (Alta) and 7120/1-3 (Gohta). were awarded in the area through the 20th and 21st rounds in 2009 and 2011 respectively. Well 7220/10-1 in PL 533 proved a Exploration of the “Alta” and “Gohta” area (south-western part small gas discovery in Cretaceous and Jurassic rocks. Drilled in of the Loppa High) began in 1985, when three production 2014 in PL 609, the 7220/11-1 (Alta) well encountered a total oil licences were awarded in the ninth licensing round. Drilled in column of about 45 metres and a 10-metre gas cap in 1985, the first two wells – 7120/1-1 and 7120/2-1 – encountered carbonate rocks with good reservoir properties. Four appraisal positive traces of oil in Upper Permian carbonate rocks. These wells were drilled on the “Alta” discovery in 2015, all showing have subsequently proved to lie in the rim zone of the “Alta” traces of petroleum. The age of the reservoir rock is uncertain, and “Gohta” discoveries. Five wells in all were drilled in these but is assumed to be Triassic and/or Permian. licences. While 7120/1-2 proved a small oil discovery, the others encountered only traces of hydrocarbons. The licences were later relinquished.

Pl 136 Pl 182 7 8 9 7 8 9 7 8 7 8 9 7 8 9 7 8 POLHEIM SUB PLATFORM POLHEIM SUB PLATFORM Pl 225

LOPPA HIGH LOPPA HIGH 10 11 12 10 11 12 10 11 10 11 12 10 11 12 10 11

• 7120/2-1 (1985) • 7120/2-1 (1985) • 7121/1-1 (1985) • 7121/1-1 (1985) • 7120/1-1 (1985) • 7120/1-1 (1985) Pl 108 Pl 109 Pl 111 1 2 3 1 2 3 1 2 1 2 3 1 2 3 1 2 • 7120/2-2 (1991) • 7120/2-2 (1991) Pl 109 • 7120/1-2 (1989) • 7120/1-2 (1989) 4 5 6 4 Pl 110 6 4 Pl 110 4 5 6 4 5 6 4 5 • Exploration wells spudded before 1992 • Exploration wells spudded before 2006 Production licences at March 1991 Production licences at December 2000 Awarded in 1997 as seismic area, de ned as PL in 2004

Pl 532 • 7219/8-2 (2013) 7 8 9 7 8 9 7 8 7 Pl 608 9 Pl 532 8 9 7 8 POLHEIM SUB PLATFORM POLHEIM SUB PLATFORM

Pl 609 Pl 533 LOPPA HIGH Pl 710 Pl 533 LOPPA HIGH 10 10 11 12 10 11 12 10 11 11 12 10 11 12 10 11 Pl 659 • 7220/11-1 (2014) • 7220/10-1 (2012) • 7120/2-1 (1985) • 7120/2-1 (1985) Pl 609 B Pl 492 • 7121/1-1 (1985) • 7121/1-1 (1985) • 7120/1-1 (1985) 7120/1-3 (2013) •• 7120/1-1 (1985) Pl 449 Pl 492 Pl 805 1 2 3 1 2 3 1 2 1 2 3 1 3 1 2 • 7120/2-2 (1991) Pl 438 • 7120/2-2 (1991) Pl 438 Pl 439 Pl 491 • 7120/1-2 (1989) 7120/1-2 (1989) • • 7120/2-3 (2011) Pl 767

4 4 5 6 5 6 4 Pl 490 6 4 5 4 6 4 • Exploration wells spudded before 2010 • Exploration wells spudded before 2016 Production licences at December 2009 Production licences at September 2015 Oil Gas Oil with gas Exploration history around 7220/11-1 (Alta) and 7120/1-3 (Gohta).

22 23 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

Creaming curve for the NCS 2000-15

900 2/4-23 S (Julius) 30/11-9 S (Askja Vest) 800 34/6-2 S (Garantiana) 35/9-7 (Skar ell) 2/4-21 (King Lear)

700 Johan Sverdrup

600

500

400 6406/12-3 S (Pil) 7220/11-1 (Alta) 300 7120/1-3 (Gotha) Maria 7324/8-1 (Wisting) 6506/9-2 S (Fogelberg) 200 7220/7-1 (Havis) 34/-12-1 (Afrodite) 6705/10-1 (Asterix) Ivar Aasen Barents Sea

Accumulated resources in million scm oe Edvard Grieg 7220/8-1 (Skrugard) 35/-2-1 (Peon) Norwegian Sea 100 6406/9-1 (Linnorm) Goliat North Sea 25/-4-7 (Alvheim) 0 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141 151 161 171 181 191 201 211 221 231 241 251 Wildcats

Creaming curve for the NCS 2013-15

140 Barents Sea 7220/11-1 (Alta) 120 Norwegian Sea North Sea 100 7319/12-1 (Pingvin) 80 7220/7-3 S (Drivis) 6406/12-4 S (Boomerang) 60 2/4-23 S (Julius) 7120/1-3 (Gotha) 6706/12-2 (Snefrid Nord) 30/11-10 (Kra a Nord) 40 6406/12-3 S (Pil) 7324/8-1 (Wisting) 30/11-9 A (Askja Øst) 20 6407/8-6 (Snilehorn) 30/11-9 S (Askja Vest)

Accumulated resources in million scm oe 16/4-6 S (Luno II) 0 1 11 21 31 41 51 61 71 Wildcats

The figures show cumulative resource growth in the North, nevertheless shows a steady growth in resources. The biggest Norwegian and Barents Seas between 2000 and 2015 and finds in this period were Maria and 6406/9-1 (Linnorm). between 2013 and 2015. The graph for the North Sea shows limited resource growth for The horizontal axis shows the number of wildcats in the order the early wells, followed by several substantial discoveries which they were drilled. When a new discovery is made, the resources produced a steeper curve. It flattens out again before making a proven are presented as cumulative values along the vertical big upturn with Johan Sverdrup. After that discovery, the curve axis. A steep curve shows that considerable resources have been shows only moderate resource growth. Edvard Grieg, Ivar Aasen found with relatively few wells. When the gradient is shallow, the and Johan Sverdrup were the biggest discoveries in this period. proven discoveries are small or many wells have been dry. Where 2013-15 is concerned, the Barents Sea clearly has the The Barents Sea had the smallest number of wildcats in 2000-15, highest resource growth with the smallest number of wildcats but these proved relatively substantial resources (the curve is (23). Resources discovered in the Norwegian Sea were roughly steep). Goliat, Johan Castberg (7220/8-1 and 7220/7-1), 7324/8-1 half the size of those in the Barents Sea, but more wildcats (32) (Wisting), 7120/1-3 (Gohta) and 7220/11-1 (Alta) were the biggest were drilled. The North Sea was roughly on a par with the discoveries in the Barents Sea during this period. Norwegian Sea for resource growth, but more than twice as many wells (71) were drilled there to prove the same quantity. Most of the largest discoveries in the Norwegian Sea in 2000-15 were smaller than in the Barents or North Seas, but the curve

22 23 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Steinulf Smith-Mayer has long experience as an NPD geologist.

24 25 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

CHAPTER 3

Undiscovered resources

The updated estimate for undiscovered resources confirms that total remaining resources provide the basis for oil and gas production over many decades to come. It is roughly the same as the previous estimate in 2013.

Total undiscovered resources are estimated to be 2 920 million scm oe. About half of this is expected to be in the Barents Sea, where the biggest change has occurred in the estimate. It has increased by about 125 million scm oe for this area.

24 25 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Liquid 5000 Gas

4000 BS NE

3000 2920

1600

2000 1200 Million scm oe 1400

800 825 1000 745 775 575 Million scm oe 400 0 North Norwegian Barents Norwegian 0 Sea Sea Sea continental Barents Sea shelf Figure 3.1 Recoverable undiscovered resources in total and for each part of the NCS. The expected value is specified in the 1600 columns.

1200 6000

800 5000 Million scm oe 400 365 410 4000 0 Norwegian Sea 3000 2920 Million scm oe 2000 1600 1435 1485

1200 1000

800 0

Million scm oe 495 Liquid Gas Total resources 400 250 Figur 3.3 Recoverable undiscovered resources in total, broken 0 down by liquids and gas. The expected value is specified in the North Sea columns.

Figure 3.2 Recoverable undiscovered resources for each part of the NCS, broken down by liquid and gas. The expected value is specified in the columns.

26 27 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

The NPD’s updated estimate for recoverable North Sea 17% undiscovered resources is about the same North Sea North Sea 25% Barents Sea 35% as its previous evaluation in 2013. The 40% Barents Sea Barents Sea 55% 48% biggest change in estimated resources is in Norwegian Sea 28% Norwegian Sea 27% the Barents Sea, with an increase of roughly Norwegian Sea 125 million scm oe. 25%

Liquid Gas Total

Undiscovered resources are estimated to lie between 1 350 (P95) and 5 490 (P5) million scm oe (figure 3.1). This calculation North Sea covers the whole NCS with the exception of Barents Sea North- 17% East (BSNE). See figure 3.2. North Sea North Sea 25% Barents Sea 35% The estimates for undiscovered resources are very uncertain.40% Barents Sea Barents Sea 55% 48% That reflects the difference between the high (P5) and low Norwegian Sea (P95) assessments. Uncertainty is greatest in areas with limited 28% Norwegian Sea 27% information and a short exploration history, such as large partsNorwegian Sea of the Barents Sea. It is considerably smaller in the North Sea 25% and the well-explored parts of the Norwegian Sea (figures 3.1 and 3.2). Liquid Gas Total

Liquid is expected to account for about half the total undiscovered resources (figure 3.3). The estimate for liquid is highest in the Barents Sea and lowest in the Norwegian Sea. North Sea 17% Where gas resources are concerned, the estimate is North Sea North Sea 25% significantly higherBarents in theSea Barents Sea35% than in the other parts of the NCS (figures 40%3.2 and 3.4). Barents Sea Barents Sea 55% Norwegian Sea 48% Almost half the total undiscovered resources are expected 28% Norwegian Sea 27% to be proven in the BarentsNorwegian Sea, with Sea the remainder divided roughly equally between the North25% and Norwegian Seas.

The Barents Sea contains 70Liquid per cent of expected undiscovered Gas Total resources in Triassic and older plays (figure 3.5). The Upper Triassic is included in Lower to Middle Jurassic plays in the Figure 3.4 Recoverable undiscovered resources for each part of North and Norwegian Seas, but contributes a smaller share the NCS, broken down by liquid, gas and total resources. of their resources. Plays older than the Late Triassic account for less than two-three per cent of total expected resources in the North and Norwegian Seas. 1500 Cenozoic About 80 per cent of the undiscovered resources in the North Cretaceous Sea are expected to be in Upper Triassic and Jurassic plays, Middel Jurassic-Upper Jurassic Upper Triassic-Middle Jurassic while the corresponding figure for the Norwegian Sea is Triassic about 55 per cent. Jurassic plays account for 24 per cent of 1000 Sub Triassic total undiscovered resources in the Barents Sea. Cretaceous and Cenozoic plays contribute six, 41 and 17 per cent of total undiscovered resources in the Barents, Norwegian and North 500 Seas respectively (Cretaceous plays in the North Sea Million o.e. scm include chalk reservoir rocks). This reflects differing geological developments in the three regions.

0 North Sea Norwegian Sea Barents Sea

Figure 3.5 Recoverable undiscovered resources for each part of the NCS by geological stratigraphic level.

26 27 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Changes from the 2013 analysis About 35 million scm of liquid have been found in the The estimate for undiscovered resources at 31 December 2015 Norwegian Sea since 2013. The estimate for liquid has been shows only minor changes from 31 December 2013. The ex- cut by roughly 2.5 per cent from about 375 to 365 million scm. pected value has been reduced slightly from 2 940 to 2 920 According to the new estimates, liquid is reduced by some million scm oe (figure 3.6). 50 million scm for a number of the plays. However, exploration results in recent years and new information have contributed to an upward adjustment of expectations for Upper Jurassic 3000 plays. That primarily reflects a reassessment of their potential as a result of such discoveries as 6406/12-3 S (Pil) and 2500 6406/12-3 A (Bue) (figure 3.8). 2000 The estimate for the Barents Sea has been raised by about 1500 13 per cent, from 510 to 570 million scm, primarily as a result of the 7220/11-1 (Alta) discovery. That confirmed the play from

Million scm oe 1000 Carboniferous to Permian on the Loppa High, and thereby 500 contributed to a sharp increase in its estimated resources 0 (figure 3.9). The well also proved both oil and gas, which helped to strengthen expectations of multiphase discoveries -500 in the area. Exploration history in recent years has also raised 2013 2015 expectations of making such finds in more plays than earlier Total undiscovered resources Discovered expected. petroleum since 2013-analysis

Figure 3.6 Comparison between total recoverable undiscovered resources in the 2013 and 2015 analyses. Paleocene Upper Cretaceous Liquid Upper Jurassic6703 6704 6705 6706 6707 6708 6709 6710 The estimate for liquid has hardly changed from 2013 to 2015, Permian to Paleocene (sub-basalt) with the expected value reduced by one per cent from 1 450

to 1 435 million scm (figure 3.7). 6602 6603 6604 6605 6606 6607 6608 6609 6610

Sandnessjøen 6502 6503 1400 6504 6505 6506 6507 6508 6509 Undiscovered resources, liquid 1200 Discovered liquid since 2013 analysis 1000 800 6402 6403 6404 6405 6406 6407 600 6406/12-3 S (Pil) 400 6406/12-3 A (Bue)

Million scm oe 6300 6301 6302 200 6303 6304 6305 6306 6307 0 Trondheim -200 2013 2015 2013 2015 2013 2015 2013 2015 6201 6202 Molde North Sea Norwegian Sea Barents Sea All areas 6203 6204

Figure 3.7 Comparison of the distribution of recoverable Figure 3.8 Plays in the Norwegian Sea with the biggest changes in undiscovered liquid resources for each region and the whole undiscovered resources. NCS (2013 and 2015 analyses).

Some 30 million scm of liquid have been discovered in the North Sea since 2013. The estimate for liquid has been reduced from about 565 to 495 million scm. Exploration results in recent years which indicate a smaller quantity of liquid than previously estimated are the most important reason for this change, which relates primarily to plays with Palaeocene, Lower Cretaceous and Upper Jurassic reservoirs.

28 29 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

1400 Undiscovered resouces, gas 1200 Discovered gas since 2013 analysis 1000 7216 7217 800 7218 7219 7220 7221 600 7222 7223 7224 400 Million scm oe 200 7220/11-1 (Alta) 0 -200 2013 2015 2013 2015 2013 2015 2013 2015 North Sea Norwegian Sea Barents Sea All areas 7117 7118 7119 Snøhvit 7120 7122 7123 7124 Figure 3.10. Comparison of distribution of recoverable undiscover- Goliat ed gas resources for each region and the whole NCS (2013 and 2015 analyses).

7017 7018 Hammerfest Historical changes 7019 7020 The NPD regularly publishes new figures for undiscovered resources on the NCS. Using the same methodology since the Figure 3.9 Carboniferous to Permian plays in the Barents Sea with mid-1990s provides a good basis for comparing the estimates. the biggest changes in undiscovered resources. From 1996 to 2015, this comparison shows an increase up to 2002 followed by a decline to 2010 (figure 3.11). Gas Undiscovered gas resources on the NCS are estimated to be The downturn from 2003 largely reflected a reduction in esti- 1 485 billion scm, down by 0.3 per cent from 1 490 billion mates for a number of Norwegian Sea plays, particularly their (figure 3.10). gas potential.

No change has been made to the estimate for the North Sea. In 2010, the reduction was primarily attributable to down- According to the new analysis, the expectation of finding gas graded expectations of gas discoveries in both the North and has increased somewhat for plays with Upper Triassic to the Norwegian Seas. One of the reasons in the latter area was Middle Jurassic reservoirs. This is because the exploration changed expectations of the potential off Lofoten, Vesterålen history of recent years indicates that future discoveries will and Senja following the NPD assessment published in 2010. In contain more gas than suggested in earlier estimates. The gas addition, exploration results reduced expectations for deep- estimate has been reduced to some extent for Palaeocene and water plays. Upper Jurassic plays because few discoveries have been made in these and proven deposits are small. Viewed overall, there- fore, the expectation for gas in the North Sea is unchanged.

4500 The estimate for the Norwegian Sea is down by about Barents Sea 14 per cent, from 475 to 410 billion scm. Some 30 billion scm 4000 Norwegian Sea of gas has been proven since the previous analysis. The new 3500 980 North Sea 1000 986 assessment cuts the gas potential for half the plays by up to 3000 800 990 1030 910 100 billion scm. Downgrading the sub-basalt and Palaeocene 2500 1260 1275 plays in deep water and the Upper Cretaceous play by the 945 1400 2000 1300 1500 1594 1750 Træna Basin provides the biggest reductions (figure 3.8). This 1220 1195 1195 1500 is offset to some extent by an increase in a couple of plays – Million scm oe 870 780 850 775 particularly the Upper Jurassic – which also account for the 1000 1400 biggest increase of liquid. 1200 1170 1200 1190 1175 1175 500 845 850 815 745 0 In the Barents Sea, the estimate has risen by some eight per 1996 1998 2000 2002 2003 2006 2009 2010 2012 2013 2015 cent from 765 to 825 billion scm. This reflects exploration results in recent years, including the 7220/11-1 (Alta) discovery, Figure 3.11 Total recoverable undiscovered resources over time for and new evaluations related to the 23rd licensing round. each part of the NCS.

28 29 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Barents Sea South-East and the waters around Jan Mayen were Liquid included in the estimates for the Barents and Norwegian Seas Gas respectively from 2012. That boosted the estimate for total undiscovered resources.

BS NE The proportion of gas has increased in the North Sea since 2012. Little change has occurred in the relationship between liquid and gas in the Norwegian and Barents Seas (figure 3.12). Barents Sea 1500 Methodology Several methods are available for estimating how much oil and 1000 gas might have been deposited and generated in an area. The choice of methodology depends on how much is known about 500 the area. Play analysis is the approach used by the NPD. Million scm oe Whether a play contains petroleum is uncertain until a dis- 0 2012 2013 2015 covery has been made. If producible petroleum has not been proven in a play, it is unconfirmed. Uncertainty prevails in such plays over one or more of the geological factors which must be present for petroleum to be proven. A confirmed play is characterised by a discovery which has proven producible petroleum. This does not need to be commercial.

Norwegian Sea 1500 The NPD has defined and analysed 74 plays, of which 44 have been confirmed by discoveries (table 3.1). 1000

500 Million scm oe

0 Confirmed 2012 2013 2015 REGION NUMBER Unconfirmed since previous analysis North Sea 24 4 0 Norwegian Sea 21 9 1 Barents Sea 29 17 1 Total 74 30 2 North Sea 1500 Table 3.1 Plays by region and status. 1000

500 Million scm oe

0 2012 2013 2015

Figure 3.12 Liquid versus gas in the estimates of 2012, 2013 and 2015 for each part of the NCS.

30 31 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

Estimating a single play Estimate for each part of the NCS The following variables form the basis for estimating the The NPD uses a stochastic calculation method to estimate undiscovered resources in a single play. resources in the North, Norwegian and Barents Seas. Input data for the calculations are as follows. - Area of the play The play has a delineated area. - The resource distribution for all plays in that part of the NCS. Each of these regions contains a number of plays (table 3.1). - Number of prospects per unit area The estimated number of prospects is based on an assess- - Interdependencies between play probabilities in uncon- ment of their density in one or more calibration areas where firmed plays. In frontier areas, for example, several plays all relevant elements can be counted. These elements are could be interdependent in terms of the presence of source the number of discoveries, dry wells, mapped prospects, rocks. Should a well confirm one play, the probability for leads and the number of postulated prospects (which could other plays with the same source rock will increase. be mapped in the future). - Correlations between volume and fluid parameters - Size of future discoveries across plays. Estimates of the size of possible future discoveries from postulated prospects and leads generally build on the Interdependencies and correlations between plays are of magnitude of mapped prospects in the play. Information significance for the range of the resource distribution in the from discoveries is important for confirmed plays. Data various parts of the NCS. Expected resources for one area are from relevant plays will be very significant for all plays, equal to the sum of expectations for each play. The resource while information from analogues is also important for estimate range is greater for an area with interdependencies less explored cases. Calculating the size of future discoveries and positive volume correlations than for ones with few or no builds on estimates of volume and fluid (liquid and gas) interdependencies or volume correlations between plays. parameters. Where the various volume parameters are concerned, the estimate for gross rock volume will be the Estimate for the whole NCS most significant for calculating resources in the prospect. A stochastic calculation method is used by the NPD to Correlations between volume and fluid parameters are estimate the total undiscovered resources on the basis of the incorporated in order to describe the relationship between plays across the whole NCS. The estimated expected value the various parameters. for total undiscovered resources is equal to the sum of expectations for each region. The range in the total estimate - Probability of success is the result of the range for each part and of the interdepen- The probability of making future discoveries comprises the dencies in probabilities of success and correlations across the probabilities of a play being confirmed (play probability) parts of the NCS. and of a prospect becoming a discovery if the play is confirmed. The historical finding rate for this and compar- able plays is an important input when estimating the probability of success.

- Probability of phase petroleum Evaluations of source rock and migration are used to assess the probability of proving oil, gas or a combination of both (multiphase discovery). Information from relevant discoveries is also important for such assessments.

A stochastic calculation method based on the variables described above is used by the NPD to estimate the total resources in each play. All the variables are specified with a probability distribution, except probabilities of success and phase petroleum. The variables and the correlations between certain volume and fluid parameters across deposits provide estimates for resources within each play.

Correlations between parameters and between deposits are of significance for the resource distribution’s range. A posi- tive correlation increases the range for the total resource estimates. Total resources in a play represent the sum of the postulated prospects, leads and mapped prospects when the probability of success has been taken into account.

30 31 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Definitions

Undiscovered resources: The quantities of petroleum which are estimated at a given time to be recoverable from deposits yet to be proven by drilling.

Play: A geographically delineated area where several geological factors are present so that producible petroleum could be proven.

These factors are: 1) reservoir rock: a porous rock where petroleum can accumulate. Reservoir rocks in a specific play will belong to a given stratigraphic level.

2) cap rock: a tight (impermeable) rock overlaying a reservoir rock, so that petroleum can mi- grate no further and accumulates in the reservoir. The resulting trap must have formed before petroleum ceased to migrate into the reservoir.

3) source rock: shale, limestone or coal containing organic materials which can be converted into petroleum. The source rock must also be mature – in other words, have a temperature and pressure such that petroleum actually forms – and the petroleum must be able to migrate from source rock to reservoir rock. A play is confirmed when producible petroleum is proven in it. This discovery does not have to be commercial. If no producible petroleum has yet been proven in a play, it is unconfirmed.

Play probability: The estimated probability that producible petroleum can actually be proven in a play. This probability is estimated with the aid of a geological assessment of the probability that reservoir, source and cap rocks are present in the play.

Prospect: A possible petroleum deposit with a mappable, delineated volume of rock.

Probability of success: Describes the possibility of proving petroleum in a prospect by drilling. It is the product of the probability that the play exists, the presence of a reservoir and

32 33 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

a trap, migration of petroleum into the trap and the containment of petroleum in the trap (see play).

Lead: A possible petroleum trap where available data coverage and quality are not sufficient to map or delineate the rock volume.

Uncertainty: Expresses the range of possible outcomes or results. This can be described in many ways, most often with the aid of high or low estimates (the NPD estimates, for example, that 1 350-5 490 million scm oe of total recoverable undiscovered resources remain to be identified on the NCS).

Uncertainty is usually calculated using statistical methods, such as Monte Carlo simulations. High and low uncertainties can then be described with the aid of statistical concepts. Where undiscovered resources are concerned, the NPD generally uses P95 for the low estimate. This means that, given the assumptions applied in the analysis, the probability of a result equal to or larger than the P95 value is 95 per cent. P5 is used for the high estimate, which means a five per cent probability that the result will be equal to or larger than the P5 value.

Expected value: The average value. This is generally defined as the arithmetic mean of all the outcomes in the statistical distribution. It is much used, and has the property that the expected value for various distributions can be summed to give a sum of distributions.

Basin Play Prospect Discovery/ eld

32 33 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

34 35 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

CHAPTER 4

Full-cycle profitability of exploration

Exploration contributed substantial value to society between 2000 and 2014, according to the NPD’s analysis of its full-cycle profitability during this period. Overall net cash flow from discoveries made in these years is estimated at roughly NOK 2 000 billion after deducting exploration costs.

The analysis shows that exploration made a positive contribution to value creation in all parts of the NCS. Both activity and resource growth have clearly been greatest in the North Sea, with Johan Sverdrup as the biggest contributor to value creation. Exploration in the Norwegian and Barents Seas has also generated substantial value.

34 35 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

- Relatively little infrastructure has been developed in the Exploration contributed substantial value to Barents Sea, which creates great uncertainty over both the society between 2000 and 2014, according value of the resources and the choice of development solution. That applies particularly to the gas resources. to the NPD’s analysis of its full-cycle Establishing coordinated development and transport solutions could cut costs and/or increase resource recovery profitability during this period. from a development, and thereby increase the value of the discoveries. Such coordination gains have only been in- cluded to a very limited extent in this analysis. Overall net cash flow from discoveries made in these years is estimated at about NOK 2 000 billion after deducting explora- - Activity on the NCS creates big spin-offs for other parts tion costs. of the economy. Such effects are also likely to be substantial with the development of discoveries made in 2000-14. These The analysis shows that exploration made a positive spin-offs and possible socio-economic value have not been contribution to value creation in all parts of the NCS. Both quantified in the analysis. activity and resource growth have clearly been greatest in the North Sea, with Johan Sverdrup as the biggest contributor to Exploration activity and resource growth in the period value creation, but exploration in the Norwegian and Barents A total of 583 exploration wells were drilled in 2000-14, Seas has also generated substantial value. A large proportion breaking down as 407 wildcats and 176 for appraisal. Most of of this value will fall to the government through the tax the wildcats were drilled in the North Sea (figure 4.1), amount- system and the State’s Direct Financial Interest (SDFI) in ing to 63 per cent for the whole analysis period. The Barents petroleum activities. Sea had the smallest number of wildcats – 52, or 13 per cent.

Elements not included in the analysis

- Exploration in 2015 has not been included because resource 250 figures for the new discoveries are uncertain. Resource growth from the 16 new finds made in that year is in the 200 order of eight to 20 million scm of oil and 14-40 billion scm of recoverable gas and condensate. These finds are all small 150 and close to existing fields. No estimate has been made 100 of their value. NOK 25-30 billion was spent on exploration in 2015. 50 Number of wildcats spudded wildcats of Number 0 - Wildcats provide information on the type, properties and North Sea Norwegian Sea Barents Sea age of the rocks. In areas with few wells, data from each well will be worth a lot in terms of geological information. That Figure 4. 1 Wildcats spudded 2000-14 by region. value has not been quantified in this analysis.

- Where future field developments are concerned, the The 407 wildcats yielded 215 discoveries, giving a finding rate analysis has not taken account of the substantial reduction of 0.53 for the whole period. in costs over the past year. The cost estimates applied in the analysis could therefore be somewhat too high. Where certain discoveries are concerned, recoverable resources, reservoir complexity and/or location in relation to - Most of the discoveries are expected to be developed as established infrastructure could mean that development has satellites to existing fields. A tie-back to existing infra- been assessed as unlikely even in the long term. Substantial structure is cost-effective in many cases, and the only changes in technology or price would be needed to make commercial solution for small discoveries. Without this them commercial. Sixty-four discoveries fall into this category opportunity, many of the latter could not be developed or and are excluded from the profitability analysis. In addition, would have been significantly less profitable. Such tie-backs nine discoveries where the resources are included in existing could help to extend the economic life of the host field, fields – primarily because they are small – have also been and thereby allow it to continue profitable production and excluded. Exploration costs for both types of discoveries have to improve recovery. This additional value can be been incorporated in the analysis. substantial, but has not been quantified in the analysis. At 1 370 million scm oe, the overall resource estimate for the - Extending the commercial life of infrastructure provides whole period breaks down as 378 million scm oe gas and incentives for further near-field exploration because more 992 million scm oe liquid (figure 4.2). discoveries can be produced while the facilities are in place and on stream. Such positive external effects have not been valued in the analysis.

36 37 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

1600 Liquid 1400 Gas

1200

1000

800

600

400

200

0 2000 2002 2004 2006 2008 2010 2012 2014 Accumulated recoverable resources in million scm oe

Figure 4.2 Accumulated recoverable resources from discoveries in 2000-14 (million scm oe).

The biggest discoveries made during the period are Johan Sverdrup, Johan Castberg (7220/8-1 and 7220/7-1), Goliat and 7220/11-1 (Alta). Although several large finds have been made, most are smaller than 10 million scm oe (figure 4.3).

50 Median size 45 Recoverable resources by discovery 40 35 30 25 20 Million scm oe 15 10 5 0 1 11 21 31 41 51 61 71 81 91 101 111 121 131 141

Figure 4.3 Overview of recoverable resources per discovery in 2000-15, ranked by size excluding Johan Sverdrup.

36 37 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Methodology and assumptions Estimated costs for 2016 and beyond reflect the 2014 level. All phases of the business, from exploration to cessation and As with product price trends, and not unaffected by these, removal, are covered by the analysis (figure 4.4). The full-cycle substantial uncertainty prevails about how the level of costs profitability of exploration is defined as revenues from disco- will develop. It has been assumed that the level of costs veries in the period less costs incurred in every phase from reflected in the forecast will roughly accord with an oil price of exploration to cessation. Revenue and cost flows are discoun- about USD 90 per barrel. Where future field developments are ted to the same year. concerned, the analysis has not taken account of the substan- tial reduction in costs over the past year. The cost estimates Production and cost estimates reported by the operators have applied in the analysis could therefore be somewhat too high. been utilised for virtually all the discoveries. The NPD has used its own calculations for a few finds which had not been The estimates for full-cycle profitability of exploration are evaluated at 31 December 2014. Dates for coming on stream uncertain. This partly reflects uncertainties in resource esti- coincide with the assumptions for the forecast in the 2015 mates, developments in product prices and the level of costs. revised national budget. Development decisions have yet to be taken for a substantial proportion of the discoveries made in 2000-14. How far these The analysis has been produced at a time of great uncer- have progressed through the planning process varies, which tainty over price developments. Following an assessment of means that estimates for production and costs vary in quality. various forecasts, the oil price trend applied has been adjusted When developments will come on stream is very uncertain, downwards from three of the four scenarios in the IEA’s World too, which will also have a substantial effect on the present Energy Outlook for 2015. The NPD analysis assumes a gradual value. rise in oil prices from the present level until 2020, when they are expected to remain at USD 90 per barrel measured in fixed 2014 prices. A similar approach has been taken for the natural gas price. The estimate for the latter in 2020 is NOK 2 per scm in fixed 2014 prices. Profitability is calculated using discount rates of four and seven per cent.

Exploration Exploration costs for all discoveries are included. Also covers dry wildcats.

Concept choice Includes costs related to assessing different develop- ment concepts. Development phase Investment related to developing the discovery.

Operations phase Production revenues and costs in the operations phase. Shutdown and cessation phase Costs related to cessation and disposal. Figure 4.4 Illustration of the various elements included in the full-cycle analysis.

38 39 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

Calculated profitability Total net cash flow from discoveries in the period is estimated at about NOK 2 000 billion after deducting exploration costs. The net present value is roughly NOK 1 000 billion and almost NOK 600 million at discount rates of four and seven per cent respectively (figure 4.5).

2 500

2 000

1 500

1 000

500 0 Billion 2014 NOK Billion 2014 0 4 7 -500

-1 000 Discount rate (%) Present value exploration costs Present value excl. exploration costs Net present value

Figure 4.5 Value creation at various discount rates.

These estimates show that exploration activity has been profitable in all parts of the NCS (figure 4.6). Its value has clearly been greatest in the North Sea. Total net cash flow from discoveries in this region during the period is estimated at some NOK 1 400 billion after deducting exploration costs. The net present value is roughly NOK 800 billion and almost NOK 500 million at discount rates of four and seven per cent respectively.

Exploration activity in the Norwegian and Barents Sea has also created substantial value, with a combined net cash flow of around NOK 500 billion.

800 Cash ow 700 4% discount rate 7% discount rate 600

500

400

300 Billion 2014 NOK Billion 2014

200

100

0 Johan North Sea excl. Norwegian Barents Sverdrup Johan Sverdrup Sea Sea

Figure 4.6 Estimated net present value of exploration in 2000-14 by various parts of the NCS.

38 39 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

A section of the very first NCS map from 1965, produced in connection with Norway’s initial offshore licensing round. It provides an overview of the companies which secured the first production licences on the NCS. 40 41 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

Chapter 5

Player picture

A player picture which reflects the challenges facing the industry in both mature and less mature areas is important for realising the resource and value potential.

Companies involved in the exploration phase today display considerable diversity. The result has been a high level of activity, increased competition and a greater variety of ideas, which have yielded many discoveries and created substantial value for society. A greater number of companies involved in the exploration phase has also increased the number of operators for discoveries and fields.

40 41 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Having a variety of players in the exploration phase is an The many mergers between the big oil important condition for the highest possible value creation. companies in the late 1990s and around 2000 Despite many new participants, the NCS remains attractive for the big companies. left fewer and larger international players. The industry now appears to be entering a new consolidation At the same time, the NCS – and particularly phase, similar to the one in the late 1990s. The signals are the North Sea – had developed into a more the same as in earlier periods with low oil prices, where the companies first reduced costs and investment before mergers mature petroleum province. The resulting took place. A slight reduction in the number of companies occurred in 2014 and 2015 (figure 5.1). decline in discovery size meant challenges were different from before. Opportunities in mature areas of the NCS were of limited 60

interest to several of the big companies. 50

The government implemented a number of measures both to 40 improve predictability in the licensing process and to widen company participation. These included prequalification, the 30 APA scheme and refunding the tax value of exploration expenses (see the box). Combined with rising oil prices, these 20

steps have contributed to more participants and greater diver- Companies on the NCS sity. Many small and medium-sized oil and gas companies and 10 European gas/power enterprises became established on the 0 NCS. So did a number of new Norwegian undertakings. 2000 2002 2004 2006 2008 2010 2012 2014 The total number of players almost doubled from 2002 to 2007 Small companies (figure 5.1).* Fifty-three companies were involved on the NCS Medium-sized companies at 31 December 2015. Figure 5.1 EuropeanDevelopment gas/power in the companies number of companies on the NCS since 2000.Majors Large Norwegian companies

Five different company categories

The NPD has divided players on the NCS from 1965 to Small companies Atlantic, CapeOmega, Concedo, 31 December 2015 into five categories: large Norwegian Core, Dana, Explora, Faroe, Fortis, companies, majors, medium-sized companies, European Kufpec, Lime, Noreco, North Energy, gas/power companies and small companies. Origo, Petrolia, Pure, Skagen44, Skeie, Spike Table 3.1 presents the breakdown of players active as licensees on the NCS at 31 December 2015. Petoro is Medium-sized BG, Capricorn, DEA, Det Norske*, defined as a large Norwegian company, even though it companies Hess, Idemitsu, Lotos, Lukoil, Lundin, is not an oil company in the conventional sense but acts Maersk, Moeco, MOL, OMV, Premier, as the licensee on behalf of the government. Allocation Repsol, Rosneft, Suncor, Tullow, to the various categories is based on a combination of Wintershall size, nationality and phase (strategy). Size is defined by the enterprise’s market value on the stock exchange. European gas/power Bayerngas, Centrica, Dong, E.ON, The transfer of companies between different categories companies Edison, GDF Suez, PGNiG, VNG has been preserved historically, since they mainly change type as a result of mergers. Over the past Majors BP, ConocoPhillips, Eni, ExxonMobil, 15 years, only Det Norske has changed company Shell, Total category on the basis of discoveries which have increased its market value on the stock exchange. Large Norwegian Statoil, Petoro companies

*Det Norske ranked as a small company until 2011. Table 5.1 Categorisation of licensees on the NCS at 31 December 2015.

* This development is described in detail in the 2013 resource report. 42 43 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

Production licences Number of farm-ins Oil price USD/bbl, Large Norwegian and medium-sized companies hold the and asset swops real prices (2015) most production licences and acreage on the NCS (figure 5.2 160 140 and 5.3). However, large Norwegian companies have reduced 140 120 their share of total production licences and roughly halved 120 their proportion of licensed acreage since 2005. Medium- 100 100 sized companies have increased their share of both 80 production licences and acreage over the same period. The 80 60 increase since 2012 partly reflects the reclassification of Det 60 40 Norske from small to medium-sized company. 40 20 20 0 0 600 2000 2002 2004 2006 2008 2010 2012 2014 Oil price 500 Small companies Figure 5.4Medium-sized Acquisition companies and divestment of interests in production 400 European gas/power companies licences inMajors 2000-15 by company category. Large Norwegian companies 300

200 Number of farm-ins, farm-outs and asset swops FARM-OUTS FARM-INS 100 -300 -200 -100 0 100 200 300

Number of awards - adjusted for interest Medium-sized companies 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Small companies Figure 5.2 LicencesLarge Norwegian by the companiesvarious company categories in Majors European gas/power companies 2000-15. European gas/power companies Medium-sized companies Large Norwegian companies 160000 Small companies Majors 140000

120000 Figure 5.5 Acquisition and divestment of interests in 2000-15 by 100000 company category. 80000

60000 Exploration activity and results 40000 Spending and the number of wells can say something about 20000 how actively companies participate in exploration, while

Acreage (sq.km) - adjusted for interest resource growth and profitability provide an indication of 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 their performance on the NCS. Large Norwegian companies However, exploration activity and results are also affected Figure 5.3 AcreageMajors in square kilometres by the various company European gas/power companies by where the companies are exploring on the NCS and the categories in 2000-15. Medium-sized companies prospectivity of the acreage awarded. Comparing players Small companies active in mature parts with those engaged in frontier areas Acquisition and divestment of interests is difficult, because the latter acreage offers a lower average A well-functioning secondary market for trading in licence probability of success and a higher probability of making big interests is important for achieving efficient exploration of the discoveries than the former. Where companies explore reflects resource potential on the NCS. both their own strategy and government licensing policy.

In line with the rise in the number of companies and licences, Exploration results such as resource growth and profitability and with oil price developments, the secondary market for are measurable and can say something about the commit- interests has expanded substantially since 2000 (figure 5.4). ment of the companies. However, they do not pick up company contributions in the form of good exploration Small and medium-sized companies are the most active parti- concepts and active participation in production licences. cipants in the secondary market. Large Norwegian companies and majors are net sellers (figure 5.5), while the Large Norwegian and medium-sized companies have been other categories are net buyers. the most active explorers during the period, measured by the

42 43 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Exploration costs 1000 Billion 2015 NOK 900 35 800 Small-sized companies 700 Medium-sized companies 30 600 European gas/power companies 500 Majors 25 Large Norwegian companies 400

Million scm oe 300 20 200 100 15 0 2010 2011 2012 2013 2014 2015 10 Small-sized companies Medium-sized companies 5 European gas/power companies Majors 0 2000 2002 2004 2006 2008 2010 2012 2014 Large Norwegian companies

Figure 5.6 Investment in exploration over the past five years by Figur 5.9 Accumulated resource growth in 2010-14 by company category. company category. Excludes discoveries not currently expected to be developed (RC 6).

Number of wildcats Resource growth by region

LICENSEES LICENSEES

Number of wildcats spudded* Million scm oe 0 10 20 30 40 50 60 70 80 0 50 100 150 200 250 300 350 400

Medium-sized companies **227 Medium-sized companies Large Norwegian companies Large Norwegian companies **165 European gas/power companies Small companies **183 Small companies North Sea European gas/power companies **134 North Sea Norwegian Sea Norwegian Sea Majors Barents Sea Majors **75 Barents Sea

*Adjusted for equity interest **Number of equity interests

Figure 5.7 Wildcats drilled in 2010-15 by company category and Figure 5.10 Resource growth per region in 2010-15 by company licensees. category, licensees.

OPERATORS OPERATORS

Number of wildcats spudded Million scm oe 0 20 40 60 80 100 0 50 100 150 200 250 Medium-sized companies Medium-sized companies

Large Norwegian companies Large Norwegian companies

European gas/power companies European gas/power companies North Sea North Sea Majors Majors Norwegian Sea Norwegian Sea Small companies Barents Sea Small companies Barents Sea

Figure 5.8 Wildcats drilled in 2010-15 by company category and Figure 5.11 Resource growth per region in 2010-15 by company operator. category, operators.

44 45 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

amount invested and the number of wildcats drilled both as licensees and operators (figures 5.6, 5.7 and 5.8). These players 2015 Remaining reserves Resources in discoveries* Million scm oe Million scm oe have also held the most production licences and acreage in 0 1000 2000 0 1000 2000 recent years. Large Norwegian During the first half of the 2000s, large Norwegian companies companies and majors accounted for the biggest investment in exploration. Spending on this activity has increased substanti- Majors ally since 2005, and other company categories have increased their share of total investment. Medium-sized companies have Medium-sized companies accounted for the biggest proportion of exploration spending in recent years. European gas/ power companies Large Norwegian and medium-sized companies proved the largest proportion of resources in 2010-15, both as licensees Small companies Liquid and as operators (figures 5.9, 5.10 and 5.11). Gas

*Resources in RC 4F, 5F and 7F These players are responsible for the largest share of resource growth through their participation in Johan Sverdrup. Maria Figure 5.12 Remaining reserves and resources in discoveries on the and the 6406/12-3S (Pil) discovery represent the most significant contribution to growth from small companies. NCS at 31 December 2015, broken down by oil and gas. Similarly, holdings in 7220/8-1 Johan Castberg have contri- buted significantly to resource growth from majors. The 35/9-7 (Skarfjell) and 7220/11-1 (Alta) discoveries have Large Norwegian companies Medium-sized companies played a corresponding role for European gas/power 450 Majors 400 companies. Small-sized companies 350 European gas/power companies At 31 December 2015, large Norwegian companies and 300 majors owned about 85 per cent of remaining reserves – 250 in other words, resources covered by a development decision 200 – and about 60 per cent of resources yet to be sanctioned for 150 development. The player picture for resources in discoveries is NOK billion (2014) 100 more balanced than for remaining reserves (figure 5.12). 50 0 Exploration over the past 15 years has contributed substantial value to society, according to the NPD’s analysis of the full- cycle profitability of this activity during the period as descri- Figure 5.13 Profitability of exploration in 2000-14 by company bed in chapter 4. category.

Profitability has been calculated for exploration in 2000-14. Broken down by company category, the analysis shows that 50 its value has been particularly high for large Norwegian and 45 medium-sized companies (figure 5.13). That reflects the big 40 contribution from Johan Sverdrup. Exploration has paid off for 35 all company categories. 30 Player picture in development and operation phases 25 Interests were held in discoveries and fields by 45 of the 53 Companies 20 companies on the NCS in 2015. The number of licensees with 15 such holdings has increased since 2000 (figure 5.14). 10 In the latter year, 27 licensees had interests in discoveries and 5 fields. Growth from 2005 to 2010 occurred primarily among 0 2000 2005 2010 2015 small and European gas/power companies. From 2010 until 1 January 2015, the principal expansion was among Small-sized companies Medium-sized companies medium-sized companies. Before the big growth in numbers European gas/power companies between 2005 and 2010, virtually all the players on the NCS Majors had holdings in fields or discoveries. Since then, this proporti- Large Norwegian companies on has fallen to about 80 per cent. Figure 5.14 Licensees in discoveries and fields on stream.

44 45 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Thirty-one of 53 companies were licensees in fields in 2015 35 (figure 5.15). While about 90 per cent of the players in 2000 held such interests, that proportion was roughly 55 per cent in 30 2015. The reasons could be that a majority of the newer parti- 25 cipants on the NCS define themselves as exploration compani- es, and that it has been easier to make new discoveries than to 16 20 acquire interests in established fields. 15 Operators of discoveries and fields 12 10 At 31 December 2015, 22 of 45 licensees in discoveries and companies Number of fields were also operators. Fifteen were operators for fields 8 5 on stream. That represents almost a doubling over the past 15 years. Many medium-sized and European gas/power 0 companies established themselves as operators in 2009-13. 2000 2005 2010 2015

Number of operators 4 The number of operators has been stable since 2013 (figure Small companies 5.16). Figure 5.15 LicenseesMedium-sized in fields. companies European gas/power companies 0 2000 2002 Majors2004 2006 2008 2010 2012 2014 The growth in operator numbers partly reflects Statoil’s Large Norwegian companies transfer of operatorships to others as well as field develop- Small-sized companies European gas/power companies ments operated by medium-sized and European gas/power Medium-sized companies companies. Large Norwegian companies Majors

16

12

8

Number of operators 4

0 2000 2002 2004 2006 2008 2010 2012 2014 Small-sized companies Figure 5.16European Operators gas/power with fields companies on stream on the NCS. Medium-sized companies Large Norwegian companies Majors

Before 1990 1990-2009 2010 and after Who develops discoveries? The graphs presents changes in the type of company operating field developments between three periods.

Majors predominated in the first of these. Hydro and Statoil later dominated development activity before and after 2000. More companies now have responsibility for development projects. The latest period also includes planned Large Norwegian companies developments. Majors Medium-sized companies European gas/power companies

46 47 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

Adjustments to operating parameters A number of measures were adopted in the first half of the 2000s to stimulate competition and increase company diversity on the NCS. Three changes to operating parameters have been particularly important.

- The prequalification scheme was established to offer companies an evaluation of their suitability for partici- pation on the NCS before they devoted possible resources to assessing specific commercial opportunities. Great interest in prequalification has been displayed since it was introduced, and a steady trickle of companies are still seeking such advance assessment.

- The APA scheme, combined with adjustments to the design of work programmes, provides companies with a regular supply of exploration acreage and ensures that exploration is pursued actively. In this way, the arrangement also facili- tates efficient resource use in the oil companies and makes sure that previously relinquished acreage becomes available to players with new ideas. Areas awarded earlier will thereby also be subject to reassessment.

- Refunding the tax value of exploration expenses means that the companies can choose whether to have 78 per cent of their exploration costs refunded the following year or deducted from their tax liability. The scheme was introduced to ensure equal tax treatment of exploration costs, regard- less of whether a company already has taxable earnings. That in turn reduces possible entry barriers for new players and facilitates profitable exploration. Established companies with taxable earnings can continuously deduct exploration costs and thereby reduce their tax payments by the 78 per cent figure. Alternatively, players without such earnings can carry the loss forward with an interest supplement (or have the tax value of the loss refunded when ceasing activity on the NCS). This scheme means that small companies which have yet to acquire taxable earnings can reduce tied-up capital and thereby improve cash flow.

46 47 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

48 49 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

CHAPTER 6

Geological mapping by the NPD

Geological mapping by the NPD in unopened and frontier areas of the NCS helps to enhance understanding of the geology and to expand data coverage. Funds for this work are provided over the government budget.

48 49 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

Aquired 2012 Aquired 2013 Geophysical surveys Aquired 2014 Seismic surveys Acquisition of seismic sections involves generating sound waves from a source above or in the sub- surface. These waves propagate through the strata and are reflected back to sensors on the seabed, at the sea surface or in a well. That makes it possible to form a picture of the sub-surface geology. Seismic mapping of the NCS began in 1962.

2D seismic: Data acquired, processed and presented as separate seismic lines/cross-sections through the sub-surface.

3D seismic: Data acquired as closely packed separate lines, but processed and presented as a three-dimensional volume of the sub-surface.

Gravimetric surveys Measuring variations in the Earth’s gravitational field in order to reveal the composition of the sub-surface.

Magnetometric data Measurements of variations in the Earth’s magnetic field in order to reveal the composition of the sub- surface.

200 km

Figure 6.1 Seismic surveys in Barents Sea North and North-East. Shallow boreholes Holes drilled in order to acquire information on the rock characteristics and/or carry out geotechnical examinations for the location of installations and which are not drilled to discover or delimit a petroleum deposit or to produce or inject petroleum, water or other medium (section 2, resource manage- ment regulations). The boreholes are cores drilled to a maximum of 200 metres. The consent of the Petroleum Safety Authority Norway must be secured to go deeper than 200 metres. See section 25 of the management regulations.

50 51 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

Acquisition of geological information by the 0˚ 5˚ 10˚ 15˚ 20˚ 25˚ 30˚ 35˚ 40˚ NPD and its mapping of unopened and KVITØYA frontier parts of the NCS help to increase 80˚ understanding of the geology in these areas 78˚ SPITSBERGEN and to expand data coverage. A good data

and knowledge base is essential for the 78˚

government to play a crucial role in resource 76˚ management. Funding of the NPD’s mapping

work is provided over the government budget. 76˚

74˚ Seismic surveys in Barents Sea North and North-East Shallow wells 2015 Shallow wells before 2015 The NPD acquired a total of 32 600 kilometres of 2D seismic data in Barents Sea North and North-East during 2012-14. 15˚ 20˚ 25˚ 30˚ 35˚ These surveys were mainly conducted in the area north of 74° 30’ N, which has not been opened for petroleum activities. Figure 6.2 Shallow boreholes in Barents Sea North. A total of 13 700 kilometres of long lines were systematically acquired during 2012 in a relatively tight mesh over the new In the years following the 2011 ratification of the boundary area to the east, close to the boundary with the Russian sector. treaty with Russia, the NPD received funds over the govern- Previous surveys in this area had been limited. Favourable ice ment budget for 2D seismic surveying in the new areas. conditions also made it possible to acquire three seismic lines Knowledge of the rocks there is limited, particularly in the right up to 81° N (figure 6.1). northern part. Acquiring new cores is therefore crucial for mapping the far north along the boundary with Russia. Data acquisition in 2013 and 2014 took place mainly in the eastern part of Barents Sea North, again close to the Russian Funds were appropriated in the 2015 government budget boundary, covering 13 200 and 5 700 kilometres respectively. for shallow drilling, and cores up to 200 metres long were West of the area where Norway and Russia had overlapping collected. The primary area for this work lay south and north claims, older data are available from 1971-97. Their quality is of Kvitøya (figure 6.2). Outcropping rocks of various ages are mostly poor, and they were acquired with older technology. found at the seabed there, with the Triassic series and contact Conducting new surveys has accordingly been important in with the underlying Permian of great geological interest obtaining a better geological understanding of the area. (figure 6.3). The water depth is 230-360 metres. Gravimetric and magnetometric data were also acquired at the Seven successful shallow boreholes were drilled with depths same time as the seismic surveys in 2012-14. This information varying from 52 to 200 metres. Locations were chosen on the will help to increase understanding of the geology in the area. basis of 2D seismic data, and the objective was to retrieve cores from stratigraphic boundaries which primarily occur at All the seismic data acquired in 2012-14 have been processed. deep levels in the Barents Sea but which, for various reasons, Hard and uneven seabed conditions as well as shallow water are found at shallow depths in the survey area. A total of 1 048 made this work very demanding. That applies particularly metres of cores were retrieved, and knowledge acquired from to the areas around Bjørnøya and up towards Svalbard. As a result, the data are currently being reprocessed (2014-16). 7934/6-U1 7934/6-U2

Shallow boreholes in Barents Sea North Sea bed Geological mapping in Barents Sea North began with 2D 500 Intra Triassic seismic surveys in the mid-1970s. Acquiring geological cores Intra Triassic eventually became necessary in order to understand which 1000

rocks were producing the seismic signals (reflectors) visible ms Close to top Permian in the data. Learning about the age of the rocks was also 1500 important in order to understand the geological development of Barents Sea North over time. Several shallow scientific 2000 10 km boreholes were drilled in the late 1980s to increase geological knowledge of the area. The last of these surveys was con- Figure 6.3 Seismic cross-section showing boundaries of rock ducted east of Kong Karls Land in 2005. outcrops.

50 51 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

these will increase geological understanding of the northern Barents Sea. Possible thin GRS99 105 basalt

Preliminary results from the shallow drilling south of Kvitøya 3000 show that the oldest rocks are from the Carboniferous and Permian, with deposition of carbonates and shales. The Permian-Triassic boundary is well preserved in the cores. 3500 A dark shale from the Middle Triassic found in the cores is ms

expected to be rich in organic material. A borehole drilled ROV dive north of Kvitøya has revealed dolomites which were probably deposited in the Carboniferous. Gjallar Ridge South 4000 Very thick sandstone layers with thin coal beds have been 4 km deposited in the Late Triassic. A preliminary interpretation Courtesy of TGS is that these strata were deposited as a big river plain at the northernmost edge of the Barents Sea. This plain was flooded Figure 6.5 Seismic lines illustrating ROV dives on the southern by the sea, with deposition of marine shales, before a new extension of the Gjallar Ridge. pulse of sandstones was deposited at the Triassic-Jurassic boundary. More exact dating of the material in the cores and studying the chemical properties of the rocks will provide sediments. No sedimentary rocks older than Late Cretaceous important information for further geological interpretation were encountered, which accords with the results from the of the area. 6603/5-1 (Dalsnuten) exploration well.

Expedition with ROV Geological samples were also retrieved on the same expe- An expedition with a remotely operated vehicle (ROV) was dition from the Vøring Spur (figures 6.4, 6.7 and 6.8). Upper undertaken in 2013 by the NPD in cooperation with the Cretaceous volcanic rocks and fine-grained sediments were University of Bergen. Covering the north-western part of the encountered here. Manganese deposits were also identified in Norwegian Sea in just under 3 500 metres of water, it aimed this area. to acquire rock samples from beneath the volcanic basalt in a cost-effective manner. This was done by installing a chain saw in order to cut samples from steep rock outcrops. Intrusive Locations were determined using seismic and bathymetric Sedimentary rock (not datable) information. The material recovered from the southern end Sedimentary rock (Maastrichtian) Sedimentary rock (Campanian) of the Gjallar Ridge (figures 6.4, 6.5 and 6.6) reveals the Sampling point presence of a number of thick intrusions which have solidified as columns. Uranium/lead (U/Pb) dating gives their age as Late 2300 m Palaeocene (57 million years ago), and they have intruded into fine-grained Upper Cretaceous (Maastrichtian and Campanian)

+ Vøring Spur 2900 m Basalt 3000 m DSDP 643 5 km

DSDP 642 Bodø Figure 6.6 The Gjallar Ridge, with sampling points and 100-metre contours for water depth. 6603/5-1 «Dalsnuten»

+ Gjallar Ridge South

6403/1-U-1 6403/6-1 (Edvarda) 6403/10-1 (Solsikke)

6302/6-1 (Tulipan) + Rov 2013 Trondheim Scienti c well Exploration well

Figure 6.4 Areas explored by ROV in 2013.

52 53 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF 2016

1500 LOS 006 Shallow boreholes in the western Møre Basin 2000 Few data have been acquired earlier in the western part of the Møre Basin. To increase understanding of the geology, shallow 2500 boreholes were drilled on the Møre Marginal High in 2014, 40 3000 kilometres north-west of well 6403/6-1 (Edvarda) (figure 6.4). 3500 4000 The water depth in the area surveyed is about 2 100 metres,

ms and drilling was limited to 200 metres beneath the seabed.

4500 ROV dive The primary objective of the expedition was to recover cores 5000 from tilted reflectors deeper than 130 metres beneath the

5500 Vøring Spur seabed in order to clarify whether these are sedimentary and/ 6000 or volcanic rocks (figure 6.9). The results show that these tilted reflectors comprise volcanic rocks formed by rapid cooling 6500 20 km of lava coming into contact with seawater. That provides 7000 important information on the geological development of this Figure 6.7 Seismic lines showing ROV dives on the Vøring Spur. part of the Norwegian Sea. The drilling yielded no information about possible exploration targets beneath the basalt.

Intrusive W E Sedimentary rock (not datable) 6402/3-U-2 6403/1-U-1 Sedimentary rock (Maastrichtian) m NPD MB11 005 Manganese Sampling point 2100 0 m (seabed) 2200 m

2200

130 m (base overburden)

2300 TD 170 m 3500 m 250 m 3600 m

3 km Cored interval

Figure 6.8 The Vøring Spur, with sampling points and 100-metre Figure 6.9 Seismic cross-section showing tilted reflectors from contours for water depth. depths of 130 to 170 metres.

52 53 2016 PETROLEUM RESOURCES ON THE NORWEGIAN CONTINENTAL SHELF

New structural elements in Barents Sea South-East Mapping of Barents Sea South-East by the NPD has

32° identified a number of large geological structures in this area. Four new structural elements have so far been defined and formally approved by the Norwegian Haapet Dome 74° Committee on Stratigraphy (Mattingsdal et al, 2015). These structures have been named after vessels used Innside omslag bak for research in Arctic waters. Bjarmeland Platform Haapet Dome: Haapet was the sailing ship used by geologist Balthazar Mathias Keilhau for what has been Veslekari Dome described as the first proper scientific expedition to Svalbard in 1827. The structure is a large low-relief Polstjerna Fault dome with a diameter of roughly 40 kilometres. Complex Veslekari Dome: Veslekari, built in 1918, was the third 73° ultra-robust wooden ship built for Arctic conditions after Fram and Maud, and carried a number of scientific Nordkapp Basin x l e expeditions in high latitudes. The structure is a large m p lt Co elliptical dome, about 50 kilometres long by 25 wide. Fau en Fedynsky High rs e Signalhorn Dome: Signalhorn, built in 1914, was an v I Arctic vessel used for both scientific expeditions in o r T h these waters and oil exploration around Svalbard. The structure is a large, oblong, low-relief dome, about 60 kilometres long by 15 wide. 72° Tiddlybanken Polstjerna Fault Complex: Polstjerna, build in 1949, was Basin Signalhorn used in part for scientific expeditions around Svalbard Dome and ranks today as Norway’s best-preserved Arctic vessel. It is on display at Tromsø Museum. The structural element represents a fault zone separating the Bjarmeland Platform from the northernmost part Finnmark Platform of the North Cape Basin.

71°

Reference: Mattingsdal, R, Høy, T, Simonstad, E, and Brekke, H, 2015, An upda- ted map of structural elements in the southern Barents Sea. Poster Norway Russia presented at the 31st Geological Winter Meeting, 12-14 January 2015, Stavanger.

Vardø

54 55 Publisher: Norwegian Petroleum Directorate Professor Olav Hanssens vei 10 P O Box 600, NO-4003 Stavanger Telephone: +47 51 87 60 00 E-mail: [email protected]

English translation: Rolf E Gooderham 1. Introduction and summary 5 Photographs: MBMedia, Emile Ashley and archives Printed by: Kai Hansen, Stavanger ISBN 978-82-7257-215-9 2. Exploration on the NCS 10

3. Undiscovered resources 24

4. Full-cycle profitability of exploration 34

5. Player picture 40 Conversion tables 6. Geological mapping 48 1 scm of oil = 1 scm oe 1 scm of condensate = 1 scm oe 1 000 scm of gas = 1 scm oe 1 tonne of NGL = 1.9 scm of NGL = 1.9 scm oe

Gas 1 cubic foot 1 000 British thermal unit (Btu) 1 cubic metre 9 000 kcal 1 cubic metre 35.3 cubic feet

Crude oil 1 scm 6.29 barrels 1 scm 0.84 tonnes oe (toe) 1 tonne 7.49 barrels 1 barrel 159 litres 1 barrel/day 48.8 tonnes/year 1 barrel/day 58 scm /year

MJ kWh TCE TOE Scm Barrel natural gas crude oil

1 MJ, megajoule 1 0.278 0.0000341 0.0000236 0.0281 0.000176 1 kWh, kilowatt hour 3.60 1 0.000123 0.000085 0.0927 0.000635 1 TCE, tonne coal equivalent 29 300 8 140 1 0.69 825 5.18 1 TOE, tonne oil equivalent 42 300 11 788 1.44 1 1 190 7.49 1 scm natural gas 40.00 9.87 0.00121 0.00084 1 0.00629 1 barrel crude oil (159 litres) 5 650 1 569 0.193 0.134 159 1

See also the dictionary on the NPD website at http://www.npd.no/en/About-us/Information-services/Dictionary/

54 55 Resource 2016 report

Resource report

Professor Olav Hanssensvei 10 P O Box 600 NO-4003 Stavanger 2016 Telephone: +47 51 87 60 00 www.npd.no [email protected]