18 September 2013, News Wires – The recent Offshore Europe 2013 conference in Aberdeen, Scotland, saw several presentations and debates regarding the future of Europe – and the North Sea in particular – as a hydrocarbons region. One of the most insightful that Rigzone attended was a presentation by Wood Mackenzie – titled “Independents – staying ahead of the game” – into the role played by independent oil and gas companies around the world in exploration and production.
While Europe is no longer the main focus for many of the world’s top explorers, it still can offer favorable project economics compared to the rest of the world, Simon Flowers, Wood Mackenzie’s head of corporate analysis, said. This, Flowers argued, means Europe is attracting smaller independents that are looking to balance risk and reward even though Europe has fewer and smaller discoveries than many other regions.
“We’ve just completed a major new study where we’ve modeled technical reserves: a total of 600 billion barrels of oil and gas held in more than 2,000 discoveries around the world. These are discoveries that remain undeveloped for one reason or another … Europe’s share is pretty small as you’d expect from a maturing region and because we are pretty efficient in developing assets here,” Flowers said.
“But the value per barrel at $3.22 is higher than any other region and this reflects the infrastructure and fiscal regimes among other things. Smaller discoveries can be very profitable and this combination of size and returns is one of the reasons why the mature parts of the North Sea are attracting a lot of smaller companies.”
Despite Europe being a region with several maturing basins, there are still a few sizable discoveries to be found, according to Flowers.
“Europe actually has 21 of the world’s most-prospective basins … There are four with more than two billion barrels [each], three of which are in Norway. There’s another eight with more than half-a-billion barrels. If we add all of these up it gives a total of 17 billion barrels of oil equivalent – the same as Brazil’s Santos Basin, which is the world’s number one hotspot. So there’s still plenty to play for here,” Flowers said.
East Greenland, Offshore Spain and the Mediterranean
When it comes to the future exploration potential for Europe, Flowers believes there are a few “hidden gems” in the region.
“If you take a very broad view of the region there is a lot to sustain the industry’s interest in the coming decades, whether it’s the E&Ps [exploration and production companies] or the service industry,” he said.
From the point of view of unconventional resources, Russia has an enormous play in the shape of the Bazhenov shale oil formation, which has an estimated 25 billion barrels, Flowers noted.
“But there’s plenty in Europe proper: the Paris basin; some in the UK, Netherlands and Poland. There will no doubt be many more,” he said.
From a conventionals standpoint, Flowers highlighted that the west Barents Sea in Norway and west of Shetland are just two basins that account for the 17 billion barrels yet to be found in Europe. But he also noted several other parts of Europe.
“East Greenland, for example … There’s been drilling in west Greenland, but in east Greenland the source rock is thought to be the same as mid-Norway. Iceland may be quite similar,” Flowers said.
Cairn Energy plc is an independent that has taken a chance on Greenland, although after a disappointing drilling campaign there, it has since diversified its exploration focus to offshore Ireland and Morocco.
As far as Morocco is concerned, although it is not strictly a part of Europe, Flowers believes that any success from several wells due to be drilled there during the next two years could open up interest in the Atlantic Margin further north in Spanish and Portuguese waters.
“Lastly, in the east Mediterranean next to Israel’s huge reserves of gas, where there has been around 30 Tcf [trillion cubic feet] of gas found already, Cyprus has found about seven Tcf with more wells coming. And Malta is another emerging Mediterranean play with Genel due to drill a well later this year – the first there in 10 years.”
Flowers concluded his presentation by saying that independents, “to their credit”, have led the industry during the past decade and their entrepreneurial approach should keep them ahead of competition from majors and NOCs, while Europe still has “a surprisingly wide range of opportunities for independents, small and large”.