North West European Continental Shelf Oil & Gas Activity

August 17, 2012

Against a background of continuing financial uncertainty the oil price remains reasonably high, as does the level of activity in the North Sea, particularly in Norway with the planned development of the substantial Johan Sverdrup find. Reserves estimated at 1.7-3.3 billion boe have been discovered, making the find one of the largest ever on the Norwegian continental shelf since the mid-1980s. First oil is looked for in 3Q 2018.

Earlier this year Norway adopted a new policy of naming fields after famous figures in politics and the arts. Johan Sverdrup is the new name for the Avaldsnes and Aldous Major discoveries, operated respectively by Lundin and Statoil. A pre-unit agreement was signed in March this year whereby it was agreed that Statoil will act as working operator for the Johan Sverdrup discovery until the plan of development is submitted. The current timetable is for concept selection in 4Q 2013; and plan of development submission 4Q 2014.

Other name changes include Statoil’s Aasta Hansteen field (previously Luva), which will be developed using a Spar for which a PDO submission is due in December; Lundin’s Edvard Grieg (ex Luno), and Total’s Martin Linge (ex Hild), both of which were granted final approval in June. Shell plans to make an FID in 1Q 2013 for the Linnorn subsea tieback to Draugen, previously known as Onyx South-West.

Statoil was granted PDO approval by the Norwegian energy ministry for the Stjerne (ex Katla) and Vigdis NE fast-track developments last September. In November, Total gained approval for Atla and Lundin for Brynhild. Statoil received approval to develop the Jette oil field this February.

shuttle tankerBetty Knudsen shuttle tanker loading at Ithaca’s Athena oil field, which came onstream in May.

Statoil has transferred to Marathon Oil operatorship of the Vilje field, in block 25/4 (PL036D), about 20km northeast of the Marathon-operated Alvheim field. This includes Vilje South, which is currently under development. Statoil says the transfer, which is subject to government approval, makes sense, because Marathon is the biggest operator in the area and is therefore in a position to maximise value for the partners. Marathon submitted a PDO for the Bøyla field this June, as a subsea tieback to Alvheim, while Statoil submitted a PDO for the fast track Svalin development, as a subsea tieback to Grane, the same month.

On the enhanced recovery front, Statoil’s development of the Åsgard subsea gas compression was approved this spring. This will increase field recovery by around 280 million barrels of oil equivalents. The system is expected be ready for start-up in the first half of 2015. Statoil is also planning to install subsea compression on Gullfaks South. This will add 22 million boe to production from the Gullfaks South Brent reservoir, and is scheduled for completion in the autumn of 2015.

In 2011, the Danish Energy Agency approved five plans for the further development of existing oil and gas fields – Dan, Gorm, Halfdan and Tyra. In addition, the DEA has approved the development of the new HPHT Hejre (Heron) field last October. Production from the Hejre field is expected to start in 2015. In Ireland, the Corrib Gas Partners said this spring that completion of the muchdelayed Corrib gas project will represent an investment of €800m in Ireland by the partners over the next three years.

Operators in the UK sector of the North Sea have been encouraged by the boost given in the UK Budget in March. The UK government is to give a tax break to ‘large and deep’ oilfields west of Shetland with a new £3 billion field allowance, along with targeted measures to encourage further investment in UKCS brownfield developments. Under the Budget proposals legislation will be introduced later this year to increase the allowance for small oil and gas fields, first introduced in the 2009 Budget, to £150 million and increase the size of fields which qualify to 6.25 million tonnes (about 45 million barrels). There are also plans to end uncertainty over decommissioning tax relief by employing a new contractual approach.

ensignCentrica’s unmanned Ensign platform in 21.5m of water in the southern North Sea produced first gas in May.

UK oil field approvals in 2011, since OE’s last set of activity tables was published, have been: EnQuest Conrie in August, BP Kinnoull in September, Nexen Golden Eagle and Peregrine in October and Valiant Causeway in December. BP Clair Ridge was approved as an incremental oil project in October. Centrica’s York gas field, and Bridge Energy’s Victoria phase two as an incremental gas project were also approved in October.

UK oil field approvals so far this year have been: Talisman Goodwin in January, EnQuest Alma and EOG Resources Conwy in March, Ithaca Stella and Premier Solan in April. Ithaca’s Harrier condensate field, which is being developed with Stella, was also approved in April. Three gas fields have been approved so far – ConocoPhillips Katy and HRL (Centrica) Rhyl in April, and GDF Suez Juliet at the end of June.

Environmental statements (ES) currently being processed in the UK sector include: Iona’s Orlando tieback, DEO Petroleum’s Perth field development, Centrica Energy’s Kew tieback, Talisman’s Montrose bridgelinked development, Iona Energy’s Kells tieback, Shell’s Fram development, Chevron’s Alder development and EnQuest Galia’s redevelopment of the Duncan field, which ties back to Alma (previously Argyll, then Ardmore), for which approval was granted in March.

EnQuest says in its environmental statement it is now commercially viable to carry out the redevelopment of Galia due to the current and forecasted oil price and the UK small field reserve allowance.

Statoil has said it plans to invest a further £12 billion over the life of the UKCS Mariner and Bressay heavy oilfields, in addition to £6 billion already announced. First production from Mariner is looked for in 2016, and for Bressay in 2018.

Start-ups

UK start-ups last autumn were: Wintershall’s Wingate gas field in October and Nexen’s Blackbird oil field in November. Start-ups so far this year have been Apache’s Bacchus oil field and Total’s Islay condensate field, both in April. Caithness’s Lybster oil field, Centrica’s Ensign gas field, and Ithaca’s Athena oil field all started production in May.

In Norway, BG started up production from the Gaupe field, in the southern Norwegian North Sea licence, marking the group’s first output from the Norwegian Shelf. Both DONG’s Oselvar oil and gas and Eni’s Marulk gas condensate Norwegian sector fields started up this April.

In the Dutch sector Chevron produced first gas from B13 last December and Wintershall from K18 this February. Dana started up production from the Van Ghent and Van Ness fields in January and April respectively. These fields together make up the Medway development.

Partners in the Nord Stream pipeline operating company have asked the company to carry out a feasibility study of possible options to increase capacity in the twin gas pipeline from Russia to the EU through the Baltic Sea. The first of Nord Stream’s two parallel pipelines became operational last November. Each line is about 1220km long and has a transport capacity of 27.5bcm per year. Line 2 has already been laid and is undergoing precommissioning for planned start-up late this year.

Licensing

On the licensing front, Iceland’s National Energy Authority (NEA) launched a second offshore licensing round last October, offering 14 blocks, covering an area of 42,700km2, in the Dreki area, northeast of the island. The deadline for the submission of applications was 2 April 2012. Later that month the Irish energy ministry awarded 12 companies a total of 13 licences, comprising 64 blocks and partblocks, in the Atlantic Margin licensing round, covering the Goban Spur and the Porcupine, Rockall and Slyne Basins.

At the end of December 2011, the UK’s DECC awarded a further 46 licences, covering 109 blocks, in a second tranche of the 26th round. The acreage was held over from an initial 144 awards in October 2010 because of the need for further assessment on Special Areas of Conservation and Special Protection Areas. The UK’s DECC received a record 224 applications this May for the 27th offshore licensing round covering 418 blocks of the UK Continental Shelf. The 27th round was launched in February 2012 and closed for applications on May 1.

In January this year, the Norwegian government offered 42 companies – including 27 as operator – interests in 60 licences in the APA 2011 round. The Norwegian energy ministry launched the 22nd licensing round at the end of June, inviting bids for 86 blocks or part-blocks, comprising 14 in the Norwegian Sea and 72 in the Barents Sea. The deadline for applications is 4 December, with awards expected before summer 2013. The Danish Energy Agency is preparing a new licensing round in the western part of the North Sea, with the aim of inviting applications in 2013.

Mergers and acquisitions

Mergers and acquisitions continue, both in the oil company and the contractor sectors. Premier has acquired EnCore and TAQA has bought EnCore assets from Premier. Apache has acquire ExxonMobil North Sea assets previously held by affiliate Mobil North Sea, where an extension well drilled by Apache has since had initial production rates higher than any oil well drilled at the Beryl field in the UK North Sea since 2001. Fairfield has sold the abandoned Staffa field to Iona, which plans to redevelop it as Kells.

asgardSchematic of Statoil’s Åsgard subsea gas compression project, approved this spring, and due on stream in 2015.

Centrica has made significant acquisitions in Norway, including Shell and ConocoPhillips’ interests in Statfjord, and a stake in Valemon, the largest high pressure, high temperature gas development in Norway. Parkmead has acquired DEO. The takeover will give Parkmead a 52% stake in the Perth oil field, which is currently waiting DECC approval.

Techno has bought fellow diving contractor Global Industries and set up an exclusive global agreement with Bluewater. Petronas and Schlumberger have set up a framework agreement and Tokay has come to the rescue of financially troubled Seven Marine. National Oilwell Varco has acquired NKT Flexibles. Global Energy has bought the Nag fabrication yard in Scotland.

On the decommissioning front, Hess has submitted to DECC a draft programmed for full decommissioning of the Fife, Fergus, Flora and Angus (FFFA) fields, in central North Sea blocks 31/21, 31/26, 31/27a, 39/1 and 39/2. Main decommissioning activity is planned to be carried out from now until 2015. Statoil has received consent to remove the Troll Iceberg Gas Injection (TOGI) template from the seabed and transport it onshore to Leirvik Stord for scrapping and recycling. The activity was scheduled to be carried out July/August 2012 using Saipem’s heavy lift vessel S7000.

Safety

Total experienced a potentially serious gas leak from the UK sector Elgin platform this spring. The G4 well on the processing, utilities and quarters platform began leaking gas on 25 March as a result of a blowout. Gas was originally flowing from the platform at a rate of about 2kg/s, although the flowrate gradually decreased to around 0.5 kg/s. A sheen of gas-condensate also appeared on the water surface. The leak was finally stemmed on 15 May after a 12-hour top kill operation. OE

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