Norwegian authorities expect a significant increase in offshore oil and gas exploration activity this year.
Exploration is set to increase by more than 50% in 2019, according to the Norwegian Petroleum Directorate (NPD), which presented its exploration forecast on Thursday.
“We expect the total number of exploration and appraisal wells to be at the same level as in 2018, but we see more exploration and less appraisal in 2019”, NPD exploration director Torgeir Stordal told Upstream.
According to official NPD figures, 25 appraisal wells and 28 exploration wells were spudded in 2018.
While this year's total number of exploration and appraisal wells might not exceed 2018’s 53 wells, new wildcats alone may reach levels not seen since 2013.
UK-based consultancy Wood MacKenzie also expects Norway to lead a North Sea drilling upturn and forecasts more than 40 exploration wells this year for the Norwegian continental shelf as a whole, up from 27 in 2018.
WoodMac and the NPD do not have identical classifications for exploration and appraisal activity.
“While many of the prospects drilled will be infrastructure-led, we will also see new plays and ideas being tested. Roughly, companies are targeting 7 billion to 7.5 billion barrels of unrisked resources," said Neivan Boroujerdi, a senior analyst for North Sea upstream research at WoodMac.
Several factors contribute to the Norwegian exploration surge, according to Boroujerdi.
“The companies are more confident about the future and their free cash flow has increased. And I think there is a realisation that the lack of projects post-2025 is a real challenge," he said.
Despite a lack of large development projects from the middle of the next decade, WoodMac maintains an optimistic view on Norway.
“For the next 20 to 30 years we rank Norway among the top 10 countries globally in terms of both spending and resources. Norway is still attractive,” Boroujerdi said.
New players with growth ambitions have entered Norway during the downturn, which also affects exploration activity.
Boroujerdi still expects some large transactions and several smaller ones in Norway ahead.
“The competition for assets in the mergers and acquisitions market will be fierce, and most of the assets up for grabs will need buyers with deep pockets,” he said, adding that rising costs for existing assets is making exploration more attractive.
After some years of relatively small discoveries, exploration performance increased in Norway last year with about 20 million barrels of oil equivalent discovered per well, according to WoodMac.
"That is the highest figure since the downturn and it is consistent with the development we see globally,” Boroujerdi said.
Norwegian major Equinor will be the dominant explorer in 2019, followed by independents Aker BP and Lundin Norway.
An Equinor spokesperson did not want to reveal details about the company's drilling plans and referred to an upcoming capital markets day in London early next month.
However, Equinor’s head of exploration Tim Dodson told Upstream last August that the company plans to drill between 20 and 30 exploration wells annually in Norway in the coming years.
Production of oil and gas from the Norwegian continental shelf is expected to increase over the next few years because of discoveries under development as well as output growth from fields already on stream.
However, Stordal stressed that it is crucial to find new resources in the next few years.
“Production from existing fields will begin to decline from the mid-2020s and resources yet to be discovered will start making their mark.
"It takes several years to bring a discovery on stream, so making new and large discoveries quickly is necessary to maintain production at the same level from the mid-2020s,” Stordal said.
The NPD’s updated estimate for undiscovered resources off Norway is about 25 billion boe.