Statoil ASA’s ambitions to develop an Arctic oil hub were dealt a blow when its best prospect in the Barents Sea off Norway yielded no more than a non-commercial natural-gas find.
Korpfjell, close to the maritime border with Russia, was billed as Norway’s most exciting exploration well in years. While partner Lundin Petroleum AB had talked of its billion-barrel potential, the well found only 6bn to 12bn cubic meters of gas, the equivalent of 40mn to 75mn barrels of oil, Stavanger, Norway-based Statoil said in a statement last week.
“We were trying to prove many hundreds of millions of barrels of oil – we didn’t do that,” Jez Averty, Statoil’s head of exploration in Norway and the UK, said in a phone interview. “But it’s far too early to write off the Barents sea southeast.”
Statoil plans to repeat this year’s drilling campaign, with another five wells in the Barents in 2018, including one in a deeper part of the Korpfjell structure, Averty said.
Still, the result is a blow to ambitions for the Barents Sea to arrest a decline in Norway’s crude output, which has dropped by half from a peak in 2000.
Lundin, which owns 15% of the Korpfjell license, plunged as much as 7.5% in Stockholm, the most in more than a year. Statoil, operator of the licence with a 30% stake, fell 1.4% in Oslo. Chevron Corp owns a 20% stake and ConocoPhillips 15%.
The Barents Sea is thought to hold as much as 65% of Norway’s undiscovered resources, and the Korpfjell well was part of a record exploration campaign in the Norwegian Arctic this year. Still, only one oil field has reached production so far, and explorers have yet to make billion-barrel finds like in the North Sea.
Korpfjell was highly anticipated as the first well to be drilled in the Barents Sea southeast, an area formerly disputed by Russia until the two countries struck a demarcation deal in 2010. Statoil described it as the biggest remaining structure known by geologists in open parts of the Norwegian continental shelf.
“More exploration will be needed to understand the potential of this area,” Lundin chief executive officer Alex Schneiter said in a statement. “The southern Barents Sea remains an exciting exploration area.”
Statoil’s failure to prove oil in the new part of the Barents Sea follows poor results elsewhere in the area this year as the company returned to the region for its first exploration campaign since disappointing efforts in 2014. The Songa Enabler rig will now move to the Koigen Central prospect to drill the last of five wells this year.
While the Korpfjell results were “another negative data point” for Statoil’s 2017 Barents campaign, Lundin’s share price reaction was “too severe,” Danske Bank analyst Anders Holte said in a note. Lundin has three exploration wells left in the Barents this year and investors should wait until passing judgment on its campaign, he said.
The disappointment comes amid a growing debate in Norway over the future of the oil industry and whether there will be demand for resources from the Arctic if the world is successful in reducing emissions to fight climate change. The issue has become the focus of increasing attention in the campaign ahead of parliamentary elections on Sept. 11, with several parties arguing Norway should gradually scale down exploration and production.
Greenpeace activists this month staged a protest close to the Enabler rig at Korpfjell, which is the northernmost well drilled off Norway. The protesters, who were towed away by police, argue Norwegian authorities are allowing drilling too close to the edge of the Polar ice cap.
Last Updated: 04-Sep-2017