NPD Says Lack of Rigs a Bottleneck

A tight rig market curbs increased activities on the Norwegian shelf beyond the 14 exploration wells spudded this year. The result is six small or medium-sized discoveries.

There are currently 23 rigs on the Norwegian shelf, of which 16 operate for StatoilHydro. Several newcomers to the Norwegian shelf are also searching for new resources, including the Swedish Lundin company and the British company BG. While drilling activities were previously dominated by the major players in Norway, the picture is different today. A lot of exploration is now conducted by the small and medium-sized players.

If more rigs had been available, far more wells would have been drilled. Several planned wells should have been drilled, not least with a view towards phasing in any finds towards vacant capacity in existing infrastructure. The companies also had commitments through the license awards and several wells have been postponed because rigs have become a bottleneck.

The rig companies only exceptionally sign contracts of less duration than three years. Several of the oil companies therefore join forces in a contract and prepare a "drilling package" in order to drill their wells at all.

This year's wells are spread along the entire shelf: in the North Sea, the Norwegian Sea and the Barents Sea. StatoilHydro made an oil discovery in the latter in the Obesum prospect, 175 km northwest of Hammerfest. This find is exciting because it is the first in this area and therefore also lies outside established infrastructure.

It is too early to determine the size of the finds. Appraisal wells are being considered for several of them. Five of this year's 14 spudded wells were appraisal wells.

NPD director Sissel Eriksen feels the year began positively. "We are satisfied with the exploration activities so far this year. We cannot expect major finds until drilling takes place in new areas in the Norwegian Sea and the Barents Sea."

The NPD director estimates that 35-40 exploration wells will be drilled this year. Activities are progressing according to schedule so far. In comparison, 33 exploration wells were drilled on the Norwegian shelf in 2007.

Production wells

The bottleneck issue is not as prominent when it comes to drilling of production wells, as many of these are drilled from permanent installations. Notwithstanding, the activity level in the first quarter of this year was lower than the first quarter of 2007.

Thirty-one production wells were spudded in the first quarter. In comparison, 43 wells were spudded in the same period last year. Of this year's 31 spudded wells, StatoilHydro was responsible for 22 wells. The other wells were drilled by ConocoPhillips, Marathon and Talisman.

The Norwegian Petroleum Directorate's concern is that the companies employ sufficient resources to increase production from existing fields to achieve the authorities' goal of increasing the oil reserves by five billion barrels in the 10-year period 2005-2015. Analyses show that 75 percent of this increase in reserves must come from fields that are currently producing. With the current approved plans the average recovery rate from Norwegian fields is 46 percent.

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