Commentary, 5/6 2005

Published Jun 3, 2005
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Seek, and Ye Shall Find
On a positive note, this year we have begun to see an increase in gas and oil exploration. A respectable number of exploratory wells have been drilled, others are planned and – most telling of all – drilling ships are now overbooked. What a difference a year makes.

The authorities can take a great deal of credit for the increase. They, after all, did increase the number of available blocks and worked hard to give emphasis to the fact that the Norwegian Continental Shelf (NCS) can be an attractive place to do business. But, now that oil prices appear to have reached a new plateau, the economic, market-driven incentives should receive at least as much credit.

So far, the exploration results are mixed, and some of the news has been worse than just a dry hole. The recent hydraulic fluid spill in the Barents Sea is a reminder that HSE must be ever-present in our minds, and by in large, accidents can be avoided.

But things are looking up. Shell’s Onyx field off the coast of Mid-Norway is promising. It is estimated that the field contains 60 billion cubic metres of gas, which at today’s prices, could mean a gross income of between NOK 200 and 300 billion. Shell’s Draugen Field, just 40 kilometres to the east of Onyx, has been in production for 21 years, and this new find certainly breathes new life into Shell’s Halten Bank prospects.

Looking further north, the opening of the Barents Sea has given rise to a great deal of attention from the media, environmentalists, the fishing industry, not least from the oil industry and its suppliers. While the recent exploration in the far north has yet to produce headlines to rival Shell’s Onyx, the potential is great. It wasn’t so long ago that Statoil’s Snøhvit made headlines.

Snøhvit’s recoverable reserves, estimated at 190 billion cubic metres of natural gas, as well as the almost unimaginable amount of gas that the Russian’s Shtokman Field will produce lead us all to believe that this is only the beginning. The Barents will have more to offer.

But the opportunities in the Norwegian section of the Barents Sea are not only located beneath the seabed. Working together with the Russians may well prove to be immeasurably profitable in a number of ways.

The Snøhvit Field and the Hammerfest LNG plant on Melkøya have been expensive investments, but recent developments with Gazprom positions Statoil to take advantage of the giant Shtokman field. Norsk Hydro has been working with Gazprom in its development of Shtokman, applying its technological experience with Ormen Lange. The Russians will not only benefit from expertise and technology, they, via their work with Statoil and Hydro, will expand their market reach.

And these recent events – hopefully only a beginning – should show results that are not only visible on corporate balance sheets. The results of trans-national Barents Sea co-operation will naturally include improved prospects for the environment. The Russians should be praised for making the development of Shtokman more transparent.

In the end, such openness will be of profit for all who rely on the bounty of the Barents Sea.

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