Press release

Barents Spotlight

September 18, 2017
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Author: Espen Erlingsen, Partner, Rystad Energy

Publisher: Offshore Engineer

The Norwegian section of the Barents Sea is one of the key developed areas for offshore Europe. Recent oil discoveries have proven the commerciality of this province and Rystad Energy expects investments and production to grow over the coming years.

Figure 1 shows total historical and forecasted offshore Western Europe liquid (oil and NGL) production by country. For Norway, the production is also split by province. After being on a downward trend for more than 10 years, Western European production started to grow again in 2014. Since then the production has increased every year, and for 2017, the total liquid production is expected to reach 3.3 million bbl/d, up 400 kbbl/d since 2013. Over the next ten years, Rystad Energy expects that the production will continue to increase and surpass 3.5 million bbl/d in 2025. The chart shows that the main growth is expected to come from the Norwegian part of the Barents Sea province.

For a long time, the Barents Sea was a gas province with production coming from the Snøhvit field. Snøhvit was the first Barents Sea discovery in the early 80’s. Due to the remote location of the gas and the difficulties to get it to the market, almost 30 years passed before this field started commercial production in 2007. Production from the field is exported as LNG and there were problems with the liquefaction train, this kept the production low for several years. The troubling past seems to be behind the project and in 2016 the field achieved the highest production to date, exporting around 4.5 million tons of LNG.

The first oil producing field in the Barents Sea was Goliat. The Eni operated field includes 200 million boe (100 % oil) of resources and developed as an FPSO. Goliat commenced production in March 2016 after being delayed for several years and incurring over 50% costs overruns.

The next project to be developed in the Barents Sea is most likely Johan Casteberg. This field was discovered in 2011 and consists of two primary reservoirs called Skrugard and Havis. Initially Statoil, the operator, planned to develop the discovery with a floating platform (TLP) connected to an onshore terminal. After the discovery of Castberg, Statoil initiated an exploration campaign in the close proximately of the field. The purpose was to find additional resources and improve the economics of the TLP development solution. The campaign was unsuccessful and in combination with the falling oil price, the partners changed the development concept to an FPSO. The new development concept and current low unit prices have reduced the breakeven price from 80 to 33 USD/bbl.

In 2013, two new discoveries were made. OMV discovered Wisting Central, while Lundin discovered Gohta. Combined, the total discovered resources for 2013 was just below 0.5 billion boe, making Barents Sea the province in Norway with the highest discovered resources in 2013. Additional resources were discovered around each of these fields in 2014, with Wisting and Alta/Gohta being two new potential development projects in the province.

The table below shows the main Barents Sea projects, with key information, resources and estimated breakeven price.

As discoveries have proven to be commercial and new areas opened in the Barents Sea, there has been an increase in exploration activity for this province. From 2011 to 2016, eight exploration wells were drilled on average per year in the Barents Sea. In 2017, this activity is expected to increase to around 17 exploration wells. The most active drillers in 2017 will be Lundin, Statoil and Eni. Figure 2 shows the development in the number of exploration wells in the Barents.

The most exciting prospect in 2017 is the Korpfjell prospect. The Statoil operated license lies in the formerly disputed Central Barents Sea. This structure is around 39 km and 415 km, respectively, from the Russian and Norwegian mainland. The predrilled resource estimates is 2.2 billion bbl.

When adding all of the potential developments in the Barents Sea, the production is estimated to grow considerably. The first growth phase will be in 2016-2018, as the Goliat production ramps up. Figure 3 shows historical and forecasted production for this province. The next growth phase will be in the beginning of the next decade. With the anticipated startup of Castberg, Wisting and Alta/Gohta, the total Barents production may go beyond 0.5 million boe/d, and this is about three times higher than current production. The growth in production will be driven by oil, due to the latest discoveries being oil discoveries. However, to achieve this production growth, substantial investments are needed. Historically the annual investments for the Barents Sea have been just below $2 billion. After 2020, this number is expected grow and reach close to $5 billion. Most of this spending will go to subsea equipment, rigs and FPSO construction.

As new discoveries in the Barents Sea are developed, these new projects will contribute to a sharp increase in total production for this province. Within ten years, the production is estimated to pass 500 kboe/d. With these volumes, the total production for Western Europe is expected to grow after 2020. In total, the Barents Sea investments are expected to make up 20% of the total West Europe offshore investments by the start of the next decade. This is considerably higher than the current share and illustrate how important Barents Sea will be for Western Europe.

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Article Contact

Contact: David White, Marketing Manager
Phone: +47 24 00 42 00

Contact: Espen Erlingsen, Partner
Phone: +47 24 00 42 00

About Rystad Energy

Rystad Energy is an independent oil and gas consulting services and business intelligence data firm offering global databases, strategy consulting and research products.

Rystad Energy’s headquarters are located in Oslo, Norway. Further presence has been established in Norway (Stavanger), the UK (London), USA (New York & Houston), Russia (Moscow), Brazil (Rio de Janeiro), as well as Singapore and Dubai.