Neptune Energy discovery raises Norwegian oil project hopes

London — London-based Neptune Energy announced what could be Norway's largest oil discovery this year on Aug. 4, with the Dugong find estimated at between 40 million and 120 million barrels of oil equivalent and with potential upside.

In a statement, Neptune said Dugong could become a new North Sea production hub, with a nearby prospect potentially lifting total resources to 153 million boe.

"This is a significant discovery and strategically important for Neptune Energy in this region," the company's managing director for Norway, Odin Estensen, said.

"Dugong may also open up additional opportunities in the surrounding licenses, with the potential for a new core area for Neptune in Norway."

Norway continues to yield new oil discoveries, with Aker BP's Liatarnet likely to be last year's largest find, at 80 million-200 million barrels, and a find by Germany's Wintershall this April, named Bergknapp, estimated at 26 million-97 million boe.

The country's oil production has been rejuvenated by the 2.7 billion barrel Johan Sverdrup field, which was discovered in 2010 and came on stream last year; Norwegian oil production reached 2.1 million b/d in April, before the authorities imposed a temporary cut to help stabilize the market.

However, no discovery in recent years has come close to Johan Sverdrup in size, and hopes for an expansion into the Barents Sea have been muted by lackluster discovery volumes and high costs.

Neptune said the latest find, in Upper and Middle Jurassic formations, could justify a standalone development, but offers multiple development options, being close to the Snorre field and existing infrastructure in the Tampen area, home to fields such as Oseberg, Statfjord and Troll.

"We will now initiate studies as well as consider development options for the discovery," Neptune's exploration and development director, Steinar Meland, said.

Neptune holds a 40% stake in the Dugong discovery license, with 20% stakes held by three companies: privately owned Concedo, a subsidiary of Oslo-listed service company Petrolia, and Japan's Idemitsu.

Exploration outlook

Norway heavily subsidizes oil and gas exploration, with 78% of costs reimbursed.

Regulator the Norwegian Petroleum Directorate said in July about 12 exploration wells had been postponed due to COVID-19 and as many as 17 could be postponed this year in total. With 12 exploration wells completed in the first half, it said it expected 30 to be drilled in total in 2020.

That represents a low not seen since the mid-2000s, but the NPD said it still expected most of the postponed wells to be drilled by the end of 2021.

NPD Director General Ingrid Solvberg said July 17 there were signs of the industry stabilizing and activity recovering in the wake of emergency tax breaks. "There is still a basis for high, long-term value creation on the Norwegian shelf," she said.

Neptune Energy is 49% owned by sovereign wealth fund China Investment Corporation, alongside US private equity companies Carlyle Group and CVC Capital Partners.