Arctic waters see unlikely boom in oil exploration
OSLO — With the oil industry barely recovering from its most brutal slump in decades, you might expect the Arctic Ocean to be the last place explorers would hunt for new discoveries. The Barents Sea off Norway’s northern tip is different.
Norwegian authorities expect companies, including Lundin Petroleum and OMV, to drill a record 15 wells in the Barents this year. Statoil’s Songa Enabler, a floating drilling machine the size of two football fields, is in the vanguard of those efforts as it embarks on a five-well exploration campaign.
The Barents enjoys a number of advantages over the US Arctic, where President Donald Trump is pushing to expand drilling. Thanks to the Gulf Stream, it’s largely icefree, unlike other areas such as Alaska and Greenland, which have been deserted by oil companies like Royal Dutch Shell since 2014. The relatively shallow waters off Norway mean drilling is less costly, while the potential prize is huge: the Enabler’s fourth well will be Korpfjell, probably the largest prospect to be tested offshore Norway since the 1990s.
“It’s the biggest remaining structure that we know of on the Norwegian shelf,” Tim Dodson, head of exploration at Statoil, said aboard the rig last week. “It’s important for us, and for northern Norway and the entire country, actually.” Norway is betting the under-explored Barents could boost its oil industry, after crude production fell by half since 2000. There could be more than 17 billion barrels of oil and gas yet to find here, or almost 65 per cent of Norway’s undiscovered resources, according to estimates from the Norwegian Petroleum Directorate.
In Hammerfest, the regional oil hub that bills itself as “the northernmost town in the world,” the industry downturn since 2014 that prompted tens of thousands of job cuts along Norway’s North Sea coast has gone largely unnoticed.
Encircled by snow-clad hills on a fjord south of the town centre, Polarbase serves ships supplying the Songa Enabler and other rigs. When oil exploration in the Barents was halted for six years during the 1990s, Polarbase survived by selling snow scooters and farming salmon. This time is very different.
Exploration is booming and “we’re now focused on oil and gas,” said Ketil Holmgren, manager of Polarbase.
Statoil, Lundin and OMV have already made discoveries totalling more than a billion barrels in the Barents Sea since 2010, and Eni last year started producing oil from Goliat, the area’s first platform. Statoil plans to make a final investment decision on the Johan Castberg project this year after reducing costs by more than 50 per cent.
Korpfjell is high-risk — Dodson sees a one in six chance of making a find there — but its multi-billion barrel potential could also prove high return. With a higher probability for Statoil’s other targets, he expects to make at least one discovery.