Oil service executive sees fast exploration growth

Oct. 20, 2008
Exploration services are likely to grow much faster than the overall oil field services market worldwide for years, Schlumberger Ltd. Chairman and Chief Executive Officer Andrew Gould said.

Exploration services are likely to grow much faster than the overall oil field services market worldwide for years, Schlumberger Ltd. Chairman and Chief Executive Officer Andrew Gould said.

Absent a global recession, he is optimistic about the long-term outlook for oil and gas.

“We are now in the fifth year of an up cycle in E&P investment,” Gould said in a recent speech, noting that supply remains flat because of a declining mature production base, cost inflation, the time for exploration to translate to production, and increasing numbers of complex, capital-intensive projects in deep water or targeting unconventional resources.

“It is unrealistic to think that 5 years of increased spending in an inflationary environment can compensate for 20 years of underinvestment,” he said. He foresees continuing increased spending on exploration worldwide.

“The number of exploration blocks awarded has also been increasing substantially. This part of the business is most influenced by geopolitics and access to reserves,” he said. More than 12,000 exploration licenses were awarded during 2003-07 worldwide.

Meanwhile, the offshore drilling fleet is growing. Current construction plans will increase the existing fleet by 29% by 2012, he said, noting that a significant share of the newbuilds are designed for high-specification deepwater operations.

“Among these newbuild rigs are 44 new drillships, which will almost exclusively be involved in exploration and delineation work,” Gould said. “In addition, there are 81 new semisubmersibles capable of drilling in ultradeep water—defined as being deeper than 5,000 ft. These will probably double the number of deepwater rigs involved in exploration activity.”


The Roch SA-operated LF-1010 well in Los Flamencos field in Tierra del Fuego, Argentina, stabilized at more than 10 MMcfd of gas from Cretaceous Springhill at pressures consistent with original reservoir pressure.

LF-1010, which cut 16 m of gas pay with no oil or water leg, extended Los Flamencos west of the LF-1005 well that tested at 8 MMcfd. Tests are pending at the LF-1011 and LF-1012 wells, which further extended the field westward, said 25.78% working interest owner Antrim Energy Inc., Calgary.

Gas deliveries from eastern Los Flamencos field to the mainland via the San Martin pipeline started in September, and gathering lines are being laid to the four wells in the western part of the field. Deliveries from the concession are to rise to 40 MMcfd in mid-2009 from 20 MMcfd in mid-2008.


Frontera Resources Corp., Houston, hopes to establish production of 250 b/d of oil from Mtsare Khevi field in western Block 12 in former Soviet Georgia.

At least 40 more wells are to be drilled in 2009. The first six wells have revealed a structure larger in area than previously thought and confirmed the presence of a substantial gas cap, the company said.

The first two wells are producing a combined 31 b/d of 21° gravity oil from Horizon I of the Upper Pliocene Akchagil formation. Horizons II and III will shortly be added to production. The three horizons total 20-30 m of gross pay 200-315 m deep.

A 2007 field study indicated as much as 5 million bbl recoverable. Further potential exists in Miocene sandstones as deep as 1,100 m.


Addax Petroleum Corp., Calgary, acquired a 33.33% interest in the Sangaw North Production Sharing Contract in Iraq’s Kurdistan region 80 km southeast of Addax’s Taq Taq oil field.

Sterling Energy PLC operates Sangaw North, which covers 121,600 acres. A 310 line-km 2D seismic survey is planned in November 2008, and the first exploration well is to spud in mid-2009.

Addax said an assignment to Korean National Oil Corp. will reduce its interest to 26.67%, and the later assignment by the Kurdistan Regional Government of an interest to a government nominated entity will reduce Addax’s interest to 20%.


East African Exploration & Upstream Petroleum Services Ltd. took a farmout from Lion Petroleum Inc. of Canada on 33,000-acre Block 1 in northeasternmost Kenya.

Subject to government approval, EAX will operate the block on behalf of the EAX-Lion joint venture and will have the right to earn up to 80% equity in some circumstances.

The work program will include extensive gravity and magnetic surveying and as much as 1,200 line-km of 2D seismic in two phases, said EAX, affiliated with Black Marlin Energy Group of Dubai.

The block covers the western Mesozoic Madera-Lugh basin, representing the western Ogaden basin of Ethiopia and Somalia.

EAX also holds 40% equity in Block L17/L18 in the Lamu basin off Mombasa.


NWest Energy Inc., St. John’s, expanded to 1,459 sq km from 900 sq km its imminent 3D seismic survey in the Gulf of St. Lawrence off west-central Newfoundland.

The expanded program will hike the number of prospects surveyed from four to six of the property’s top 11 prospects. The Geophysical Service Inc. GSI Pacific seismic vessel will conduct the survey starting in mid-October.

NWest holds licenses 1097, 1098, 1103, and 1104 along the coast northeast of the Port au Port peninsula that extend 20-50 km from shore in 80-200 m of water. The four licenses total 6,599 sq km.


Quebec independents Petrolia, Junex, and Gastem completed 3D seismic and soil geochemistry surveys on 13 sq km around the Petrolia Haldimand-1 oil and gas discovery well near the tip of Quebec’s Gaspe Peninsula.

The surveys are part of a $5 million exploration effort to better understand the area’s geology before drilling more wells, possibly late this year.

Haldimand-1, 2 km west of Gaspe harbor, recovered 491 bbl of 47° gravity oil in 15 days with small amounts of gas from a Devonian sandstone perforated at 950-1,090 m in mid-2006.

Interests in the acreage are Petrolia and Junex each 45% and Gastem 10%.


Torrent Energy Corp., Portland, which filed bankruptcy June 2, 2008, is seeking a buyer or joint venture partner and will be sold to YA Global Investments LP unless it receives a better offer by Oct. 31.

The company holds 107,000 acres in Oregon and 76,000 acres in Washington. It has drilled 12 wells in three pilot projects in Oregon and one in Washington.

Torrent Energy ran apparently successful fracs on five coalbed methane wells at Coos Bay, Ore., that have begun dewatering and were totaling 356 b/d of water and 48 Mcfd of gas during September.



Palo Duro Energy Inc., Vancouver, BC, took a further impairment on its Palo Duro basin acreage in the Texas Panhandle, where it had been pursuing gas in the Pennsylvanian Bend and Permian Wolfcamp shales.

The company originally held 130,912 net acres in the basin and to Sept. 30, 2008, had reduced that to 89,903 net acres.

Following a $4.4 million impairment for lost acreage and development costs through June 30, the latest loss of further acreage will result in $5.6 million of impairment, the company said.

The company is discussing with its partner the best course of action for its remaining land position in the basin.

Palo Duro Energy said it is working on a project in the Barnett shale in McLennan County, Tex., with Aspect/Abundant Shale LP, which has a 400,000-acre position.