Exploration Activity Increases on Norwegian Shelf

The amount of exploration activity on the Norwegian shelf this year has been greater than anticipated. So far, 19 exploration wells have been spudded; of which 11 are wildcat wells and 8 are appraisal wells. The Norwegian Petroleum Directorate expects that a minimum of 20 exploration wells will be drilled on the Norwegian shelf during the course of this year.

At the beginning of the year, the Norwegian Petroleum Directorate estimated that about 15 exploration wells would be drilled on the Norwegian shelf in 2003. This would have represented a substantial decline compared with last year when 19 exploration wells were spudded.

The Norwegian Petroleum Directorate has repeatedly expressed concern over the low level of exploration activity. In Storting White Paper No. 38 On the oil and gas activities, two potential future scenarios for Norwegian petroleum activities were outlined: the decline path and the long-term development path. Up to the year 2050 the difference in value creation between the two scenarios amounts to NOK 2000 - 4000 billion at today's oil price. "A high level of exploration activity is a precondition for achieving the long-term forecasts we have set for the industry. Therefore, it is positive to note that the activity level this year is higher than our forecasts indicated at the beginning of the year," says Bente Nyland, NPD's Director for Data, Information and Knowledge Management.

Uncertain estimates
An exploration well is either a wildcat well or an appraisal well. The Norwegian Petroleum Directorate's forecasts for exploration activity are based on the activity that has been approved in the fixed budgets in the various production licenses. There are several reasons for the uncertainty associated with predicting an exact number of exploration wells during a year. If a discovery is made, this can lead to additional appraisal wells not in the original plan. And even approved plans can change during the course of the year depending on new information, access to drilling rigs, delays, etc. An overview of the number of exploration wells is further complicated by the fact that some exploration wells are junked at an early stage, e.g. due to technical or geological reasons. Therefore, the number of exploration wells shown in the table of spudded and completed exploration wells on the NPD's Fact Pages does not necessarily concur with the map showing the results of the drilling activity.

Smaller discoveries
648 wildcat wells have been drilled on the Norwegian shelf from the summer of 1966 to the end of 2002. Discoveries have been made in 263 of these wells. This gives an average technical discovery rate of 40 percent, which is extremely good by international standards.

Of the eleven wildcat wells completed in 2003, new discoveries of petroleum have been made in four of them. The discoveries are in the small to medium size range. In addition, the NPD reported on 8 August that a discovery of oil was made in well 6405/7-1 ("Ellida"). The exploration drilling activity has not yet been concluded, and a substantial amount of analysis work must be done before the operator can estimate the size of the discovery and whether or not it is commercial.

Enormous possibilities
About 60 percent of the Norwegian shelf has been opened to exploration activities, but only nine percent of this area is currently covered by production licenses. The NPD's calculations show that the Norwegian shelf still conceals a volume of undiscovered resources that is at least as large as the volume that we have produced and sold over the past 30 years.

"In other words, the largest values in the petroleum activities still lie ahead of us, if we do things right. But the road ahead is difficult and challenging - and it requires that we drill many exploration wells to prove new resources," says Director Bente Nyland.
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