Sustained exploration activity in the Barents Sea basin is vital to unlock the larger discoveries needed to warrant investment despite a recently poor run of drilling results, says GlobalData, a data and analytics company.
The company’s latest research reveals that no discoveries larger than 100 million barrels of oil equivalent (mmboe) have been discovered in the basin since 2015, even with a small increase in drilling activity.
Barents Sea oil and gas exploration has been ongoing since the 1980s and approximately 60 discoveries have been made in the Norwegian sector of the sea alone. The highest number of wells was drilled in 2014, a year that also saw the largest number of discoveries made, with a 69% technical success rate. Falling oil prices then led to a severe drop in exploration activity in the following years. However 2017 saw a sharp rise in drilling, but with reduced success, with only a 46% technical success rate, which resulted in the highest number of dry holes drilled in the basin’s history.
Daniel Rogers, Upstream Oil & Gas Analyst at GlobalData, comments, “Despite a fairly commendable technical success rate in the basin overall, only around 35% of the discoveries made are currently producing or considered for development. The lack of available infrastructure and high development costs mean minor-sized fields remain a challenge to develop.”
As the Barents Sea basin matures, its relevance will become more pronounced and its domestic position more established. In 2013, oil and gas production in the Barents Sea accounted for just 2% of the Norwegian domestic production, coming solely from the Snøhvit liquefied natural gas (LNG) project. By 2025, this is forecast to rise to over 10%. Continued production growth in the basin is forecast to reach 400,000 barrels of oil equivalent per day (boed) by 2026 with oil being the primary driver as no new gas projects are anticipated outside the Snøhvit expansion.
Rogers adds, “The Johan Castberg, Wisting and Alta-Gohta oil projects are expected to drive Greenfield production growth in the basin. A total of USD 11 billion in development expenditure could be spent on these projects alone and could unlock over one billion barrels of oil in unrecovered resources, significantly contributing to tax revenue and employment for the country.”
With the recent Johan Sverdrup production start, all eyes have been on Norway’s North Sea, yet the Barents Sea remains pivotal to the country’s long-term production growth outlook. In order to sustain the basin’s expected growth trajectory, continued exploration activity is required to unlock the larger commercially viable discoveries that have been lacking in recent years.
Rogers concludes, “Despite this, the last 5 years have not favoured the high risk, high reward exploration approach, with 30 exploration wells being drilled since 2015 and no discoveries larger than 100 mmboe.”