Statoil draws a blank in highly anticipated Arctic field

Statoil has drawn a blank from exploration at the most anticipated field in the Norwegian Arctic, raising further questions about whether the Barents Sea will live up to its billing as the next big oil and gas producing region.

The Norwegian state-controlled company said on Tuesday it had found no oil and only a non-commercial amount of gas in the Korpfjell field. There has been intense speculation over Korpfjell, with some oil analysts and companies estimating it could contain more than a billion barrels of oil, making it one of the biggest fields in Norway.“The results are of course disappointing, but it is too early to draw any conclusions on how this will impact the Barents Sea south-east area,” said Jez Averty, Statoil’s head of exploration in Norway and the UK.

Korpfjell was seen as the most exciting prospect in the first new acreage Norway had offered for decades. It is close to the Russian border and was only opened for exploration this decade after Oslo and Moscow solved a long-running dispute about where the frontier lay. Statoil has been having a difficult time with prospects in the Barents Sea. It made a series of oil discoveries there in 2011-14, in what is now known as the Johan Castberg field. But further drilling failed and it left the region for two years. At the moment, there is only one gas and one oilfield in production in the Norwegian Barents Sea. The oilfield - Eni’s Goliat platform - has been plagued by delays and safety problems. However, Statoil did manage to bring the costs down significantly for developing Johan Castberg, from about $80 per barrel in 2015 to $35 a barrel today, and the company is trying to reassure investors that the Barents Sea still has prospects. “It is important to remember that you rarely succeed on the first try in a frontier area. Thirty-three wells were drilled before the first commercial discovery was made in the Norwegian section of the North Sea. Even if we have learnt a lot since 1969, we do not expect the first exploration well to give all the answers,” Mr Averty said.

Lundin Petroleum, a smaller explorer that had also touted the prospects of Korpfjell has made a sizeable bet on the Norwegian Arctic being the next large oil region. Norway opened a record 93 blocks to exploration in the Arctic earlier this year, with applications due from oil companies later this year. After previous exploration, the region was largely abandoned in the 1980s because of a series of disappointing results. “I think until you get the first monster find there will always be questions,” said one senior Norwegian oil executive. Some analysts question whether large-scale production in the Barents Sea will ever make financial sense because demand for petroleum is expected to fall in the coming decades and due to the logistical challenges of getting the oil to market.

Source: Richard Milne for the Financial Times