After a decade of declining oil production, oil companies are once again pouring money into this region after a recent string of major discoveries…
This could be one of the greatest comebacks in recent history.
You see, with production steadily falling over the past ten years, the waters off Norway’s shores were thought to be coming to the end of their oil-bearing days.
Today, oil output in Norway has dropped to approximately half of the 3.0 million daily barrels it was churning out in 2000-2001.
But don’t let the numbers fool you.
Although most people would think the region is on the verge of being written off, a series of monster finds has shed new light on several red-hot oil targets.
Swedish explorer Lundin Petroleum AB (STO:LUPE) helped bring Norway’s oil sector back into the forefront when they discovered the mammoth 3.3 billion barrel Johan Sverdrup field in the North Sea in 2010. Commercial production there is expected to ramp up in 2018.
But an even bigger focus has been in the Barents Sea to the north.
Between 2011 and 2012, Statoil (NYSE:STO) made the first of two commercially viable oil discoveries in the Barents Sea.
Their Skrugard and Havis oilfields are said to hold some 400 to 600 million barrels of oil equivalent.
And that was just the beginning…
Austria’s OMV AG (AV:OMV) announced a discovery just last month with their Wisting Central well in the northernmost section of the Barents Sea.
The well is believed to hold up to 160 million barrels of oil and 40 billion cubic feet of natural gas.
Also in September, the Gohta discovery by Lundin is estimated to hold as much as 145 million barrels of oil and 545 billion cubic feet of natural gas.
All of this is being made possible with advancements in offshore drilling technology that didn’t exist in the past.
Similar to the shale formations in America, much of the oil-rich geology in the Barents Sea was deemed uneconomical for many years, which explains the decline in Norway’s overall production since the early 2000s.
Fast forward a decade, new drilling techniques now make it possible to locate and produce crude from the 250 million year-old Permian rocks found in Norway’s waters.
It Was a Near Miss
According to Lundin, the company utilized the latest in 3D seismic imagery to help identify the Permian rock accumulations that were largely “hidden in the shadow of big Jurassic reservoirs.
It was within the nearby Jurassic formations in the Barents Sea that companies like Royal Dutch Shell Plc (NYSE:RDSA) drilled without success.
In fact, Lundin’s recent Gohta discovery is a mere 2 kilometers away from where Shell drilled a dry well in 1986.
Talk about a close call.
Now with the recent success of Gohta and Wisting Central, the Barents Sea is looking every bit as attractive as the recent blockbuster discoveries off the coast of Israel.
“We’re hoping for a string of pearls,” said Torstein Sanness, a Lundin executive. “We plan to build resources aggressively over the next years, so there’s little doubt we’ll reach the commercial threshold for developing Gohta.”
In all, the Barents Sea is estimated to contain as much as 7.9 billion barrels of oil equivalent undiscovered resources — but that number is certain to rise once more data is collected from the latest finds.
With the Barents Sea leading the charge, the oil and gas industry in Norway is back with a vengeance.