Upstream News
WoodMac: norway's upstream sector sees record investment
Wood Mackenzie's annual review of Norway's upstream oil and gas industry concluded that the sector showed no signs of slowing down in 2013, with high levels of development spend, asset deals, exploration activity, and a record NKr 176 billion (US$30 billion) capital investment. Wood Mackenzie said heightened upstream activity has led to an increase in costs, impacting economic margins of a number of projects. In a bid to avoid the sector from overheating, the Government announced Norway's first petroleum tax increase in 20 years. By reducing the capital uplift allowance the Government hopes to ensure that operators focus more on controlling costs.
Malcolm Dickson, senior Norway upstream analyst for Wood Mackenzie said: "The Norwegian oil and gas sector showed no signs of slowing down in 2013. We saw high levels of development spend, asset deals and exploration across the upstream sector in Norway last year. Most significantly, it was another record year for capital investment - reaching almost NKr 176 billion (US$30 billion), which was a 30% increase on 2012."
Wood Mackenzie said high demand and busy development activity have driven up costs globally in recent years, but the effect was particularly prevalent in Norway in 2013. Dickson continued: "The level of cost inflation across the upstream sector in Norway led to a series of major cost revisions resulting in challenging economic margins for several large scale developments last year."
The Norwegian government also introduced the first petroleum tax increase in 20 years. "This came as a big surprise to Norway's upstream industry and although the marginal rate remained at 78%, capital uplift was reduced - hitting marginal fields the hardest, such as the Johan Castberg field," Dickson added.
2013 also saw the second highest number of E&A wells drilled on record in Norway. However, Wood Mackenzie said quantity did not always equal quality, as Dickson explained: "Overall discovered reserves were down 30% compared with 2012, with an additional 14 exploration wells. 18 discoveries yielded 715 million barrels of oil equivalent (MMboe) last year with two of the most significant finds, Lundin's Gohta and OMV's Wisting, in the Barents," he said.
Commercial M&A value was second only to the record NKr 19 billion (US$3.2 billion) set in 2012. Wood Mackenzie estimated that the value of Norway focused deals in 2013 was NKr 15 billion (US$2.5 billion) with only one less deal done. Dickson noted: "Norwegian deal activity picked up towards the end of the year, with Statoil continuing to optimize its portfolio. This created opportunities for ambitious new entrants, for whom a Norwegian portfolio would be a prized asset, given the country's prospects and stability."
Looking ahead, Dickson said: "2014 is expected to be a key year for the Norwegian upstream sector. Capital investment levels will remain high and we estimate close to NKr 176 billion (US$30 billion) will be spent across the sector this year. M&A spend could be set to surpass record levels, with the trend for larger companies to optimize their portfolios continuing, meaning there will be plenty of potential deals, with Talisman Norway, RWE Dea and Marathon Norway - just three of the portfolios up for sale."
"Norway will also see significant developments in 2014 with projects such as Johan Castberg, Johan Sverdrup and Goliat on track to reach crucial milestones in terms of their development. The impact of the 2013 petroleum tax on marginal projects will also become clearer, with a full list of developments that qualify for transition terms expected from the Norwegian government this year," Dickson concluded.
Statoil awarded Norwegian continental shelf acreage
Statoil has been awarded interests in 10 production licences in the Awards in Predefined Areas 2013 (APA 2013) on the Norwegian continental shelf. Statoil will be the operator in seven of the licenses.
Barents Sea
- 40% ownership and operatorship in PL765 - a new licence in the Hammerfest basin.
- Norwegian Sea
- 40% ownership and operatorship in PL755. .
- 60% ownership and operatorship in PL752 and 20% ownership in PL751 - two new licences in the less mature Frøya high/Froan basins.
- North Sea
- 30% ownership and operatorship in PL745S south of the Valemon field in the Tampen area.
- 50% ownership and operatorship in PL739S. This is an underexplored area southeast of Oseberg
- 50% ownership and operatorship in PL072D east of Sleipner to secure a near-field exploration opportunity in a mature area of the North Sea.
- 20% ownership in PL735S in the central Viking Graben.
- 77.8% ownership and operatorship in PL333B. This is additional acreage in the King Lear area.
- 30% ownership in PL044B - additional acreage in the vicinity of PL044 in the southern North Sea.
Petrobras: Proven presalt reserves up 43% in 2013
Petrobras has reported that its proven presalt reserves are up 43% in 2013 compared to 2012. Since 2007, the company has been adding increasing amounts to its proven reserves coming from the presalt layer, which extends from the south of the state of Espírito Santo to the state of Santa Catarina.
Currently, more than a quarter of the proven Petrobras reserves come from the presalt. Last year, 42 wells were drilled in the presalt layer, coupled with the outstanding performance of the production platforms in the Campos and Santos basins, so allowing reserves to increase by 43%. Along with the increase in reserves, production has also increased in the presalt layer. On Jan. 13, a second production well, with a production of 28,000 barrels of oil per day, on the Cidade de Paraty platform, came on stream in the Lula field. This platform now produces a total of 58,000 barrels of oil per day. As a result, a new daily record was reached on Jan.14, where oil production from Petrobras operations in the presalt surpassed the level of 390,000 barrels of oil per day. The previous record was set on Dec. 24, 2013, with 371,000 barrels of oil per day.
Of the two basins in production in the presalt, Campos and Santos, the latter contributed 51% to this record of 390,000 barrels of oil per day, with nine production wells in operation, proving the high productivity of the fields discovered in presalt layer. Average production per well, in commercial operation, in the presalt Santos Basin hub has been around 25,000 barrels of oil per well per day, which is higher than levels recorded in the North Sea (15,000 barrels of oil per well per day) and the Gulf of Mexico (10,000 barrels of oil per well per day).
In 2014, 17 new wells will be connected to platforms already installed in the presalt Santos Basin hub. In the second half of 2014, two new platforms will come on stream in the presalt hub in the Santos Basin: the Cidade de Ilhabela platform in the Sapinhoá Norte field, and the Cidade de Mangaratiba platform in the Iracema Sul field will increase daily production capacity by 300,000 barrels of oil per day in the presalt hub in the Santos Basin. These two new platforms will be connected to another five new wells in 2014.
Petrobras says that, with the two new platforms (Cidade de Ilhabela and Cidade de Mangaratiba) coming on stream and 22 new production wells in 2014 coming on stream, they will contribute to the company reaching a new presalt production record this year.
Hess reports $5.8B CAPEX for 2014
Hess Corp. reported that its exploration and production capital budget for 2014 is expected to reach $5.8B, almost half of which, $2.85B, will be spent on unconventional shale resources. The remainder of the budget will go toward production at $1.475B, developments at $925M, and exploration at $550M.
The company plans to spend $2.85B on unconventional plays with $2.2B slated for the Bakken. Spending will be increased in the Utica from $455M to $550M.
Hess plans to operate 17 rigs and bring 225 new operated wells online while investing $350m on major projects, including the completion of the expansion of the Tioga gas plant and associated pipeline and compression projects.
The remaining 51% of the company's 2014 budget will be used for production, development, and exploration around the world.
Hess's production budget is expected to reach $1.475B, divided among Equatorial Guinea, Norway, the Gulf of Thailand, Denmark, and the deepwater Gulf of Mexico.
The company's $925M development budget includes start-up of the Tubular Bells field in the deepwater gulf and full field development of the North Malay basin project.
Hess's $550M exploration budget encompasses Ghana, Iraqi Kurdistan, and deepwater gulf.
BRIEFS
ONGC, Mitsui sign exploration MOU
India's state-owned Oil and Natural Gas Corp. Ltd. (ONGC) has signed a memorandum of understanding (MOU) with Mitsui & Co. Ltd. for cooperation in exploration and production for conventional and unconventional petroleum and natural gas opportunities in India and in third countries.
In August 2012, ONGC and Mitsui entered into an MOU for wide-ranging cooperation in gas and liquefied natural gas (LNG) business. Later, in March 2013, Mitsui entered into another MOU with ONGC, Bharat Petroleum Corporation Ltd., and New Mangalore Port Trust for a feasibility study of an LNG terminal in Mangalore, India.
Abu Dhabi extends Upper Zakum concession
Inpex Corp. reports that the Abu Dhabi government has extended the concession for the Upper Zakum oil field offshore Abu Dhabi to Dec. 31, 2041, by adding more than 15 years to the previous term.
The Upper Zakum oil field is 50 miles offshore, northwest of Abu Dhabi City. It has an area of 444 square miles. Production capacity is currently targeted at 750,000 barrels per day.
The field is being jointly developed by Abu Dhabi National Oil Co. (ADNOC), ExxonMobil, and Inpex subsidiary Japan Oil Development Co. Ltd. (JODCO). Current interest ownership is ADNOC, 60%; ExxonMobil, 28%; and JODCO, 12%.