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Equinor oil and gas discovery boosts exploration revival

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Equinor oil and gas discovery boosts exploration revival

Highlights

Equinor hails 'mature area' exploration success

Efforts to revive exploration gather pace

Frontier disappointments impact success rates

London — An oil and gas discovery announced Wednesday by Norway's state-controlled Equinor and estimated at 38 million-100 million barrels of oil equivalent will go some way to alleviating concern about poor Norwegian drilling results.

The find, near the Troll complex, was hailed by Equinor as proof it is still worth exploring in highly mature areas of the North Sea. It said the field would probably be tied back to existing infrastructure, although an appraisal well is likely to be needed first. Equinor's partners in the well are ExxonMobil, Japan's Idemitsu, and London-based Neptune Energy.

Norway's upstream industry got a morale boost last month with the start of production from the giant Johan Sverdrup field. Another big project, Johan Castberg, is due on stream in 2022.

But there have been concerns about where the next big sources of production will come from.

The Echino South well was drilled near the Fram field, which itself is tied to the Troll complex. It targeted an upper Jurassic Oxfordian reservoir in the Sognefjord formation, as well as petroleum rocks of the middle Jurassic period. Hydrocarbons were proven in both targets, and a side-track well is being drilled, Equinor said.

"We are making one of this year's biggest discoveries in the most mature area of the Norwegian continental shelf. This demonstrates theopportunities that still exist for value creation and revenue from this industry," Equinor senior vice president for Norwegian and UK exploration Nick Ashton said.

EXPLORATION STRUGGLE

Equinor has been trying to improve its exploration record and aims to drill 20-30 exploration wells offshore Norway per year, either asoperator or a partner. Echino South counts as Norway's third-largest discovery this year, and is one of nine commercial discoveries -- some relatively small -- made from 29 "near field" exploration wells completed in 2019, Alexander Hazel, analyst at consultancy Westwood Global Energy Group, said.

Norwegian exploration activity and success rates have generally declined in the last half-decade. Between 2014 and 2018 the number of exploration wells completed offshore Norway fell by a quarter, while discovered commercial volumes dropped by more than half compared with the previous five years, even excluding Johan Sverdrup volumes from the calculation, Westwood Global has said.

Away from "near field" exploration, Norway's industry continues to struggle with "frontier" drilling. Of 10 frontier wells completed sofar this year, just one has yielded a commercial discovery, Aker BP's Liatarnet oil find, estimated at 80 million-200 million barrels of oilequivalent, Hazel said. "Exploration performance has improved in Norway over the year after a poor start," he said. "The high risk nature of[frontier] wells, which have delivered a 10% commercial success rate, has impacted overall exploration performance."

In general, lower exploration success rates are attributed to the maturing nature of the Norwegian basin, although in the Barents Sea there is a problem of higher volumes being needed to justify commercial developments.

Aker BP remains locked in a dispute with Equinor over how to develop the Liatarnet find, with Equinor promoting a relatively modest tie-in to existing infrastructure and Aker BP wanting to develop a new hub that it estimates could encompass 700 million boe of nearby discoveries.

-- Nick Coleman, nick.coleman@spglobal.com

-- Edited by Alisdair Bowles, alisdair.bowles@spglobal.com