Statoil gears up for potentially game-changing 2017

16 January 2017
12 January 2017, Week 01, Issue 382

A ramp-up in exploration activity could culminate in a major discovery at the Korpfjell prospect in the Barents Sea, writes Callum Cyrus

WHAT: Statoil will participate in 30 exploration wells this year.

WHY: The company’s work programme is being driven by its success in earlier licensing rounds. 

WHAT NEXT: The Korpfjell prospect could hold billions of barrels of oil equivalent.

Statoil last week confirmed it would participate in 30 exploration wells this year, up from 23 probes in 2016, with more than half of the 2017 programme scheduled for the Norwegian Continental Shelf (NCS). Statoil and its partners will sink 16-18 wells on the NCS in 2017, compared with 14 last year. 

The firm said the expanded programme reflected “changed market conditions” and its “own improvements on efficiency”.Barents Sea exploration will be key to Statoil’s plans – the frontier region will host between five and seven of its probes, including a potential game-changer at the Korpfjell prospect near the Russian border this summer.Although crude prices are showing signs of a rebound following the start of OPEC’s supply cap on January 1, Statoil’s programme has as much to do with portfolio maturity as market pricing.

While the upside from a sustained recovery would add value to any future discoveries, the state-controlled explorer is more likely to have considered some of the lowest rates for drilling rigs in recent times. Moreover, Statoil has bagged dozens of licence awards in recent Norwegian exploration rounds, so it seems likely the sheer size of its portfolio warrants a greater push before drilling prices recover.

Barents Sea

More than half of Norway’s remaining undiscovered oil resource lies in the waters of the Barents Sea, and uncovering fresh reserves here will be vital if Norway is to sustain viable production past 2030. Crude production in Norway peaked in 2001 at 3.1 million bpd, but this had slumped to 1.95 million bpd by last year, BP estimates show, though this was almost flat on output during 2014. 

As a state-controlled company, Statoil can be expected to take the vanguard in the Barents, a promising region for frontier exploration that has only yielded two producing fields to date. One of those, Eni’s Goliat, launched in March last year, and will be the site of one of Statoil’s 2017 probes.

The other is the Blamann prospect in PL 849, in which Statoil owns 50% operative interest. Statoil committed to a probe at Blamann as part of its bid during the Awards in Predefined Areas (APA) of 2015, and will look to uncover resources to tie into Goliat, where it owns a 35% stake.

Most intriguingly, however, is the probe scheduled for the Korpfjell prospect on PL 859 early in the second half of the year. It reportedly attracted the most interest from explorers when it was offered prior to the 23rd licensing round of May 2016.

Swedish explorer Lundin Petroleum has previously said that Korpfjell could hold billions of barrels of oil equivalent at structural closures three or four times those found at Johan Sverdrup. Rystad Energy, a consultancy, has placed the maximum potential of Korpfjell at 10 billion boe.

Last week, Statoil’s executive vice president for exploration, Tim Dodson, was more measured when he said: “We don’t operate with those kind of numbers as our expected volumes [but] it’s definitely high impact.

If we were to make a 500 million barrel oil discovery here, we’d be pretty happy.” It would be a significant boon to Statoil should it be able to prove the existence of a working petroleum system with those kind of reserve numbers. “Korpfjell is one of the largest prospects being drilled in Norway for decades,” DnB Markets analyst Helge Andre Martinsen told NewsBase. “So this could be a milestone not only for Statoil, but for the whole industry as well.” Altogether, Dodson claimed six of Statoil’s NCS wells could be considered “high impact” probes at prospects which could hold at least 100 million boe net.


Statoil’s expanded 2017 drilling programme followed industry forecasts that predicted lower spending on the NCS in light of the industry downturn. The Norwegian Oil & Gas Association’s latest business report estimated that investment this year would fall by 7% compared with 2016 to 143 billion kroner (US$16.5 billion), and again to 131 billion kroner (US$15.1 billion) in 2018. 

Statoil itself has trimmed exploration spending in recent years, earmarking around US$2 billion last year compared with US$3.2 billion in 2015.  The fact that Statoil is drilling more wells, then, partly reflects the company’s ability to squeeze more out of exploration budgets. 

For one, lower drilling costs for operating rigs have made their mark on exploration and development. Last year, Statoil announced it had procured three wells for the price of one from D&W at the Snorre B field, paying roughly 170 million kroner (US$19.6 million) apiece. “Now is a very good time to explore, because it hasn’t been cheaper than this for many, many, many years,” Dodson said.

Statoil’s renewed enthusiasm for exploration comes at a time when others are still contemplating the fragile recovery in crude prices. Some of this may simply be down to the timings of its licence contracts, particularly in Norway, where the firm scored in five areas, including four as operator, from the 23rd licensing round last year. As part of the offer, Statoil signed up to five commitment wells, including four in the southeastern part of the Barents Sea.

A year earlier, Statoil was awarded 13 operated licences in the 2015 APA, the highest number it had secured since 2005. “Timing-wise it’s good, but it all boils down to portfolio and the licences you have acquired over the last few years – when they are drill ready,” Martinsen said. “It’s a mix of ramping up from a low activity base but also due to development in the portfolio.” 

Martinsen also argued that the Norwegian tax regime might have bumped the NCS up Statoil’s list of priorities, over other sectors where the firm might lose out for not being tax domiciled locally. “There is a very attractive fiscal regime in Norway and they have realised that it is costly to drill [elsewhere],” he said. “For example, [drilling] in the Gulf of Mexico can be fantastic but awfully expensive when you are drilling dry wells.” Indeed, on January 6, Dodson was quoted by Dagens Naeringsliv as saying Statoil could halt its campaign in the US Gulf of Mexico after an expensive, but ultimately fruitless, operated campaign that finished 18 months ago. 

What next

Statoil’s busy 2017 programme, at least where the NCS is concerned, is being driven largely by the raft of awards from two successful licensing rounds coming onto the agenda. Lower drilling costs have helped the explorer justify greater activity at a time when there is growing optimism about OPEC’s long-awaited efforts to control global supply and prices. Oslo will take heart from the number of wells scheduled in Norwegian waters, which can only aid the sector’s efforts to soften production declines from ageing fields. 

The most exciting development of the year will be when Statoil turns its attention to the Klopfjell prospect in August. Success there could provide another Johan Sverdrup-sized game-changer for Norway, and mark the moment that the Barents Sea truly comes of age.

Edited by

Ryan Stevenson

Managing Editor

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