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A drill through the dense deep |
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Archives -
2006 Archive
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Written by J. Cresswell
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Monday, 08 May 2006 |
38 miles from the Rosebank/Lochnagar discovery on the UK side of the Faroe-Shetland Channel, the drilling of the Brugdan sub-basalt exploration well may prove critical to the future prospects of oil and gas on the Faroese Continental Shelf—but it’s not the last shot.
Mid-2006 will see the first exploration well drilled on the Faroese Continental Shelf for three years. Just one will be drilled this season, with a further wildcat attempted in 2007. Taken together, they have the potential to make or break the hunt for oil (and gas) in Faroese waters, even though only four offshore wells have been drilled to date. Three are regarded as failures and the fourth, while a significant hydrocarbon column was encountered, is today moribund.
The apparent willingness to potentially write off a near-virgin offshore province so readily has nothing to do with cavalier attitudes, rather it is because much of the Faroese shelf is masked by massive basalt flows which are difficult to “read” through and very difficult to drill.
That said, at least two of the companies involved in the hunt have basalt experience… Andadarko and Shell. In the latter’s case, for example, hydrocarbons were encountered in the Columbia Basin (US Pacific Northwest) when wildcatting through basalt with drillstem tests showing production from numerous gas zones.
Anadarko is a pioneer of the application of low frequency seismic, which penetrates deeper rocks better than conventional techniques. However, it was Professor Anton Ziolkowski of Edinburgh University in Scotland who basically promulgated the idea of using very low frequencies and it was seismic company Veritas DGC that developed the technology needed—a system known as BLAST (Basalt Large Airgun Seismic Test).
The first trial was carried out in 2001 and paid for by Veritas and the members of Faroes License Group 006 (Statoil, Anadarko, Enterprise, Phillips Petroleum and Veba Oil). It is this work that has opened the door for drilling Brugdan on license 006 and, next year, the William prospect on license 004. And it is this work, coupled with the disappointments of the four initial Round One wells that enabled the oil companies involved in Brugdan and William to renegotiate remaining obligation wells in favour of fewer high risk and very expensive wells cut through basalt, which are expected to cost at least usd 50m each.
For any Faroese interested in the idea that oil and gas may one day be located in home waters best known for the fish they yield, this year could be the most exciting yet also most frustrating ever.
Exciting because a rig will be hard at work during the summer, frustrating because, on the UK side of the Faroe-Shetland Channel, six, seven and possibly even eight wells are likely to be drilled.
• BP will drill three appraisal wells in a bid to prove up Clair North, which is seen as the next stage of development for the giant Clair field.
• Chevron has two, possibly three appraisal wells scheduled for its exciting Rosebank/Lochnagar discovery made last year.
• Shell is planning to drill Benbecula North as part of its ‘Big Cats’ campaign. Enterprise made the initial Benbecula gas find 60 miles NW of the Hebrides in 2001, prior to the company being acquired by Shell since when the latter has retained the license.
• Hurricane Exploration with Sunshine Gas will drill the Wellington Prospect using the rig Bredford Dolphin.
• Faroe Petroleum is keen to drill its Freya asset just north of Clair, but this is subject to finding a farm-in partner to spread risk, plus hiring a rig as these are in very short supply.
Of these, it is Chevron’s program that will be watched with the keenest interest as Rosebank/Lochnagar is only 70 kilometers (38 sea miles) east of where Statoil intends to start drilling the Brugdan prospect, which is thought to be an analogue of this latest and very promising UK find, except that, tantalizingly, it wears a basalt mask.
‘Equal partners’: Managing expectations, so to speak, is Faroese trade and industry minister, Bjarni Djurholm, who says the island community and its political system have got over the perhaps unrealistic expectations of recent years.
“There was great disappointment at the results of the First Round drilling carried out 2002-03,” says Mr Djurholm. “With the second licensing round… we’re more realistic about the possibilities of oil around the Faroes.
“We hope that oil will be found this summer. If we can just discover hydrocarbons under the basalt it will be a success from my point of view. But if we get a dry hole this year it will be very damaging, and even more so if the 2007 well fails to find anything.”
Mr Djurholm defends the decision to trade four obligation wells for two very high risk wells through the basalt.
“I feel confident about the agreement we did with Statoil, BP and so-on and I feel that the companies are aware of the criticality of the wells both for them and the Faroes. I feel confident too that they still see possibilities here, especially because, on the UK side they have made discoveries. But, because of the basalt, it’s very difficult to say anything about the real future.
“We know that we can see structures under the basalt that look like structures on the eastern side of the border where we know Chevron has made its Rosebank/Lochnagar oil discovery, though we don’t know how big it is.”
But it’s not as if the future of the Faroese economy hinges on oil being found. It is in quite reasonable condition, having recovered from the slump of the 1990s and dip of 2000-4. Unemployment is low—about 3 percent. “One can say that the economy is not pressuring the oil search at all… its in good shape,” adds Mr Djurholm.
But do the companies respect the Faroes? After all the islands possess what in global terms can only be described as a micro-economy and the population is a mere 48,000 or so—far less than most oil majors have on their payrolls.
“I think so,” says Mr Djurholm. “I’m sure they would rather they didn’t have to service their activities from here. When we meet with the oil companies we’re equal partners. Exploration will continue to be carried out from the Faroes, based on our requirements.”
Perhaps the most active of the two Faroese oil companies—Atlantic Petroleum and Faroe Petroleum (Föroya Kolvetni)—is probably the latter. In some respects they have broadly similar strategies: establish a credible local presence while also spreading risk by taking positions in the UK sector and, in the case of FK, also Norway.
Of the two, Faroe Petroleum has the higher risk program. Its stake in Brugdan is significantly larger too and it has acreage right next door to the license 001 Marjun discovery made by Amerada Hess in the south-east portion—known as the Gold Corner—of the Faroese aquatory during the first drilling campaign.
For Faroe Petroleum director Nils Sörensen, Marjun-1 was the Round One well that showed a convincing hydrocarbon column. But little has been disclosed about the result. “What they’re saying is that it’s a very difficult discovery and poses more questions than provides answers,” says Mr Sörensen.
But, Hess is relinquishing the license shortly so data will be made available and this is important as Faroe Petroleum has the license next door. While it is possible that Marjun may extend into it, Mr Sörensen understands why companies like Hess want out but believes Marjun has potential in the right hands.
“They do not see any other solution to this corner. It must be because there are no drillable prospects.”
At the same time, he’s pleased that Brugdan is to be drilled as Faroe Petroleum believes they will provide valuable pointers to what the company’s Ann Marie prospect on license 005 may hold.
“We still have license 002 with the Orodruin prospect. It’s on trend with the so far unexploited Suilven discovery of the mid 1990s on the UK side of the Faroe-Shetland Channel.”
ENI with Faroe Petroleum drilled the Marimas prospect on 002 in 2003, but without success. Since then, the Italian company has exited.
Atlantic, which listed on the Icelandic stock exchange last year, has been shrewd. It has stakes in UK assets such as Chestnut and Ettrick that are capable of delivering income to help underpin its domestic aspirations, albeit there will be no revenues until 2007 at the earliest.
Like Faroe Petroleum, it too is a stakeholder in Brugdan. In Atlantic’s case, it hopes the result will give clues about prospects for licenses 013 and 014 in which it has a 40-percent interest, might hold. The plan is to shoot 1,200km of 2D seismic over both this year. Meanwhile, AP is considering dropping its 5-percent interest in license 001, which expires in August anyway.
Third Round by 2007: Head of Jarðfeingi (Faroese Earth and Energy Directorate), Sigurð í Jákupsstovu shares Mr Sörensen’s views on Marjun.
“One must conclude from when the operator Amerada Hess is interested in moving its commitments from license 001 to another license, they are considering Marjun to be sub-commercial. But in our opinion, we think that Marjun deserves appraisal. Through the third round, we’re hoping the Marjun area available for appraisal. At that time all data will be in public domain, which means other oil companies can come in and make their evaluations. I may be wrong and they may now be changing their mind, but two years ago they were not focusing at all on this area. They were pulling out.”
In the hotseat for 2006 has to be Statoil general manager for the Faroes, Rúni Hansen, who is also a local. The Norwegian company has held the 006 license since 2000 on a nine-year arrangement.
“We had no well commitment on that because of the thick layer of basalt known to be present,” says Mr Hansen. “There was [and remains] little knowledge on sub-basalt and we had to develop it more before we could take on a well commitment. After 3D seismic, it was very positive for us and our geologists made a lot of effort to tailor the seismic technology for this specific mission.
“Because the license 003 well was dry and because we thought 006 might be more interesting. It was suggested that we might try to drill on it. At the same time, our license 001 partner Amerada Hess farmed into 006.
“Brugdan is a high risk well. But we would not do it if there was no possibility of hydrocarbons. Now we think it is sufficiently matured for drilling and the rig Stena Don will spud the well in July.”
Expectation is that drilling will take about three months. There is no provision for a test of any kind. Water depth is 475 meters nominal. Cost will be in the region of usd 50m but it could be more.
Outlining what BP has in mind for 2007, its general manager for Faroe, Hjarnar Djurhuus is clear that the company had to horse-trade the way it did to get out of the earlier drilling obligations following the failure of three out of the four wells drilled in the first campaign.
“We had committed to three wells but after the first drilled by BP we recommended to the petroleum administration that we should find another solution,” says Mr Djurhuus.
It was that clear cut?
“Yes,” he says. “The results from our own well and the results from the other oil companies weren’t what we hoped for. There was a working petroleum system, but you must have a seal so the oil had disappeared. There was no capture [except with Marjun].
“We started to discuss with the administration what we should do. At the end of the day, we [BP and Shell] negotiated the agreement we now have [via a farm-in arrangement with original license holder Anadarko]. Other than the Gold Corner, most of the rest of the Faroese Shelf is covered with basalt. So it will be very interesting to see how difficult it is to drill through the basalt and what the result will be. Also, how expensive will it be, how long will it take and will there be a working petroleum system beneath? Shell has drilled through basalt, so we have some experience.”
The rig most likely to drill William in 2007 is the semi-submersible rig Transocean Brother.
Regardless of whether Brugdan or William make the grade, further licensing rounds are on the cards at Jarðfeingi.
“I think we have more than just one shot left in the chamber,” says Mr í Jákupsstovu. “Of course, if the outcome of the well this year is totally negative, that will influence the interest. But there is still the other well. A further option I think we have for our area is the activity related to Rosebank/Lochnagar. Chevron announced the discovery and are very enthusiastic about it.
“I’m confident that the activity and experience and learning that companies are doing on that discovery will influence the Faroese area in a positive way. Remember, the same companies are on both sides of the line.
“In a way, the second round was very well timed in relation to that well. We were lucky that this discovery was made before we opened for bids. As for the third round, we’re working towards having one by autumn 2007. All of the six-year licenses are due to expire this year. This gives us the opportunity to relicense each Round One area through Round Three. The results of the Rosebank/Lochnagar appraisal may be available around that time too.”
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