T

he Arctic Continental Shelf contains some of the least explored geological basins on Earth. Whilst
exploration has proven successful and hydrocarbons have been discovered in basins across the
Arctic Shelf, the majority of these discoveries have proven to be non-commercial at this time due to
the technical challenges and cost implications of operating in these waters. However, wi t h a steadi ly high
oil price and new advancements in technology for operating in deepwater and harsh weather conditions,
it might not be long before these discoveries soon become viable. In recent years, levels of interest from a
variety of companies have increased across the region as the Arct ic's potenti ally large reserves draws the
attention of international and national oil companies.
Greenland and estimates unrisked prospective resources within its licence
During 2010 and 2011 , Cairn completed its first phase of exploration drilling in a variety of
basins Although no commercial discoveries were made, drilling was deemed successful in proving the
n cessary geological elements were present across the Greenlandic basins.
Cairn's current focus in Greenland is on the Pitu block in Baffin Bay, located over 800 km north of t e Arctic Circle.
Cairn, along with its jOint venture partners Nunaoil and Statoil, will take a drilling decision in 2013 to target an exploration
well in 2014, subject to the necessary approvals. Meanwhile, Greenland has halted the granting of any new offshore drilling
licences while current licences are being reviewed and more stringent safety standards are being developed.
=At ti of 2012, Iceldnd awarded its first
licences. Twelve blocks were awarded as two sparate licences to
operators Ithaca Energy and Faroe Petroleum. Both licences have a drill
or drop commitment to be made before an initial four year term ends
and Faroe Petroleum has already announced that it has mapped
several large structures and is in the process of de-risking
these leads. In addition, recent news
suggests that CNOOC
will also be awarded
acreage later
in 2013.
Norway
The Norwegian sector of the Barents Sea is one of the few areas of
the Arctic Circle with a year-round ice-free zone and is estimated
to hold undiscovered resources of 7.9 billion boe, according to the
Norwegian Petroleum Directorate (NPD), which represents 42% of all
undiscovered resources offshore Norway.
Compared to other Norwegian waters, the Barents Sea is
underexplored. In total, approximately 80 exploration wells have been
drilled in this region compared to almost 200 in the Norwegian Sea
and over 700 in the North Sea. Geological exploration of the
Norwegian sector of the Barents Sea started with seismic surveys in
the 1970s and a decade later exploratory drilling commenced when
both Norsk Hydro and Statoil spudded wells, both of which were
completed with hydrocarbon shows.
There have been a number of discoveries made in the region
in recent years, which have gone towards proving plays and the
existence of working hydrocarbon systems in the Barents Sea. In
particular, Statoil's success with the Johan Castberg and Havis
oil discoveries in 2011 and 2012 respectively has had a large
impact in highlighting the oteAtial of this area. These discoveries
e
400 - 600 million boe and were the largest and first commercial
finds in the Barents Sea for over a decade. Statoil expects to have
a field development plan for Johan Castberg in place by 2014 and
production is anticipated to start in 2018.
The Goliat field was the first oil discovery to be developed in
the Barents Sea. The field was originally discovered in 2000 and the
plan for development was approved in June 2009. The operator,
ENI Norge, plans to bring the field on stream before the end
of 2014 and anticipates production for up to 15 years. The field has
estimated recoverable oil reserves of 174 million bbls of oil and total
development costs are approximately NOK 30 billion.
The most recent licensing round to cover the Barents Sea, the
22
nd
round, was awarded in June 2013. This was the most successful
licensing round in terms of Barents Sea acreage and it has increased
the number of licences in the region to over 70. For the first time,
awards have also been made to two Russian companies, Lukoil and
Rosneft.
The Norwegian Government has now called for block
nominations for its planned 23
rd
Licensing Round in which it will
open a 44 000 km
2
Arctic area, formerly disputed with Russia that is
estimated to hold approximately 1.9 billion boe. The round will mark
the first time since 1994 that Norway has opened up a new area of its
continental shelf.
Russia
Large reserves of oil and gas are concentrated across the
Russian Shelf of the Barents Sea; however, Russia is only at the
early stage of development in the Barents Sea. Moreover, the
state has a clear intention to increase the amount of geological
investigation and research in this region, in particular through the
development of new forms of entry of companies to the shelf. The
state is also trying to stimulate companies' interest through a zero
export duty on oil and gas extracted at the shelf. Russian companies
are also interested in increasing the amount of geological exploration
work, including forming alliances with foreign companies with
experience and developed technologies to operate in the polar
latitudes of the Russian Shelf.
According to the lat est estimations, over half of combined oil
and gas resources, i.e. approximately 100 bill ion t of oil equivalent,
is accounted to the Russian segment of the Arctic. Furthermore, the
18
I OILFIELD TECHNOLOGY
November 2013
volume of C1
1
reserves is approximately 6 trillion m
3
of gas and
176 million t of oil. It is difficult to obtain exact estimates of potential
hydrocarbon resources due to the extremely low level of geological
knowledge and the irregularity of investigations in the region.
Hydrocarbon exploration of Russian areas lying on the
Arctic Shelf began in earnest in 1982 with the majority of exploration
and discoveries having occurred in the 80s and early 90s. It is during
this period in particular that large deposits were discovered, such
as the Prirazlomnoe oilfield (1989) and the Shtokmanovskoe (1988),
Rusanovskoe (1989) and Leningradskoe (1990) gas deposits.
Since then and up to the 2000s there had not been much
geological exploration in the Russian Arctic due to factors including
the state of the Russian economy. Interest levels began to rise again
in the mid-2000s when clarifications were made to the border of the
Russian Continental Shelf and further exploration of the bottom of
the Arctic Ocean took place.
As of today, less than 100 wells have been drilled, located within
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the seas of the West Arctic. The density of seismic knowledge in the Z
possible regions of the Barents and Pechora Seas is also sparse, I
however, over 500 local str ctu[es::iJave-.beeo...id.entif ied
-s=aeposlts ave een e [O[f e rc Ic-seas
In 2008, the Russian government passed a law, according
to which licensed exploration and development of the Russian
continental shelf is only possible on the basis of an order from the
government to companies with similar experience and work of
no less than five years while the state maintains majority interest
of over 50%. Currently in Russia, there are only three companies
that comply with this requirement, namely Gazprom, Rosneft and
a company that received this right very recently, Zarubezhneft.
Therefore, in order for any other company to gain access to the
shelf projects, they must create a joint venture with any of the
three companies indicated above. However, other forms of access
to the shelf are under discussion within the government, and may
make it possible for other private companies to receive this right
in the future. Such a decision is being actively lobbied by business
representatives, in particular, representatives from the largest
Russian private oil and gas company, Lukoil.
In terms of the current distribution of licences, Gazprom owns
22 licences on the Arctic Shelf. Production from the Prirazlomnoe
oilfield with estimated C1 reserves of 46.5 t of oil is expected to
commence before the end of 2013, marking first production from the
Russian Arctic Shelf. It is worth highlighting that operations will be
conducted with one of the first Russian Sea platforms, the offshore
ice-resistant fixed platform Priraz!omnaya.
Rosneft currently owns 23 licences and in the summer of 2013,
Rosneft began geological exploration work and environmental
surveys at two sites in the Barents Sea, while in 2014, is planning
to drill an exploration well in the Kara Sea. Rosneft will develop the
resources at these sites with ExxonMobil , Statoil and Eni.
Finally, Zarubezhneft has currently one application for a licensed
site in the Barents Sea, which the company intends to develop in
co-operation with PetroVietnam.
North America and Canada
In Canada, approximately 40% (4 million km2) of the land mass lies
north of 60, which is the latitude separating the oil-rich provinces
of the west with the largely under-explored northern territorial
areas. Approximately 25% of the total land mass lies north of the
Arctic Circle, however, this number does not account for the large
areas under the shallow water of the Arctic Continental Shelf. From
a geological poi nt of view, much of the region is an extension of the
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successful Western Canadian sedimentary basin. However, despite
this seeming potential, uncertainties abound as to how, when and
even if it will ever be developed.
The quest for Arctic oil and gas began early in Canada in 1920
when the world's northernmost oilfield, the Norman Wells field
was discovered under the thick ice of the Mackenzie River in the
North West Territories. Since 1932, the field has produced over
260 million bbls, although most of this production occurred after
the Norman Wells Expansion project in 1985 - 86. In addition to
Norman Wells, the Mackenzie Valley has seen 27 other discoveries
and one other producing field (Cameron Hills).
In the Arctic Islands of Nunavut, there have been 19 discoveries
from less than 200 exploration wells in total. The Bent Horn field
had produced nearly 3 million bbls of light oil for shipment by tanker
through the Northwest Passage from 1895 to 1996 when it was
abandoned by Suncor. The Canadian Broadcasting Corporation
(CBC) reported earlier this year that the federal government planned to
redevelop Bent Horn in an eventual call for bids.
The Mackenzie Delta and Beaufort Sea together encompass to
60 significant ElisGoveries with total 21::> reserves of 1 billion bbls of -
oil-ancHf)irillioiT'fP-'ofgas. Agproximatel}CQtl%---ofthatgas-CillIle
from three onshore discoveries that would have anchored the hotly
contested, C$ 16 billion Mackenzie Gas Pipeline, before it was shelved
in 2012 after a decade of regulatory review.
In June 2012, Shell Canada Limited was awarded
154 000 hectares on two exploration licences in the Mackenzie Valley
with work commitment bids totalling over C$ 90 million, one year
after Husky Energy pledged CAD$ 376 million in the same region.
The real story of 2012 however, lies in the Beaufort Sea, where
Franklin Petroleum drew attention when it won six parcels totalling
approximately 900 000 hectares (the largest Arctic land rights award in
Canadian history) with bids totalling just C$ 7.5 million. It leaves Franklin
as the second largest acreage holder in the Canadian Arctic (behind
Shell and followed by BP, MGM Energy and Imperial Oil) and the largest
in the Beaufort Sea. It seems that in Canada companies now prefer the
landlocked region of the Mackenzie Valley to the more environmentally
sensitive and rugged offshore areas of the far north.
This year, calls for bids are currently pending in the Mackenzie Valley
(six parcels) and Arctic Islands (Bent Horn) although little interest was
shown by industry in the previous Arctic Islands' call for nominations. A
call for nominations is also pending in the Beaufort Sea.
Conclusions
To date, geological exploration within the Arctic Circle has been
geographically sparse and somewhat sporadic. However, based on
current licences with outstanding work commitments and planned
exploration drilling across the different regions of the Article Circle,
interest and activity is expected to continue to rise.
However, working safely and in an environmentally friendly fashion
is becoming increasin lIY imQortant to the QerceQtion of activi
'a::JIJisJ>e:giD1TImrtrn:golcrtQr:y4e"tJews:::Wjll continue la::ne 0 slgolflcaoce.
The number of companies with the experience, know-how and
technology able to operate safely and efficiently in Arctic conditions
should increase as border issues are resolved to open up the area to
companies and partnerships that can tackle the challenges the Arctic
has to offer. eo
Reference
1, Proven reserves associated with the fields that are available for production
after a development plan is agreed,
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