(Updates with closing share price in sixth paragraph.)
Oct. 8 (Bloomberg) -- Norway may see a series of Arctic oil finds after a well produced crude from a previously unproductive layer of rock, explorer Lundin Petroleum AB said.
The Gohta discovery in the Barents Sea announced by Lundin last month was Norway’s first in Permian rocks, formed more than 250 million years ago, the company’s Norway head Torstein Sanness said in an interview. Holding as much as 145 million barrels of oil, Gohta opens as many as 10 possible drilling targets in the surrounding area, he said.
“We’re hoping for a string of pearls,” said Sanness, whose company made Norway’s biggest oil find in decades in 2010. “We plan to build resources aggressively over the next years, so there’s little doubt we’ll reach the commercial threshold” for developing Gohta.
After a decade of falling oil production, drilling in the Barents Sea is helping to revive interest in Norwegian exploration. Austria’s OMV AG also announced a discovery last month in the area, north of Norway’s traditional oil-producing region in the North Sea. Statoil made the first commercial oil discoveries in more than a decade in 2011 and 2012 and further successes will make developing oil infrastructure in the remote Arctic region viable.
“Several players are currently increasing their focus on the Barents Sea,” Teodor Sveen Nilsen, an analyst at Swedbank First Securities, said in a note to clients. “The volumes will probably be commercial” at Gohta, he said.
Stockholm-based Lundin fell 0.4 percent to close at 136.7 kronor in the Swedish capital today.
Lundin has led a resurgence in Norwegian exploration, drilling the first well in what became the Johan Sverdrup field, possibly the country’s biggest find since 1974 with as much as 3.6 billion barrels of oil.
Like Johan Sverdrup, located only 3 meters (10 feet) from where Total SA, then Elf Aquitaine, drilled a dry well in 1971, the Gohta reservoir was found 1.9 kilometers from an unsuccessful try by Royal Dutch Shell Plc in 1986, Lundin’s Norwegian exploration chief Hans Christian Roennevik said in the same interview.
“There’s a short distance from heaven to hell,” Sanness said. The Permian accumulations “have been hidden in the shadow of the big Jurassic reservoirs.”
Lundin found help in new 3D seismic imagery and in studying comparable rock formations on the Arctic island of Svalbard, some 700 kilometers (430 miles) north of the Norwegian mainland.
The Loppa High, where Gohta was found, was an area that rose as an island above sea level about 200 million years ago. It was big enough to hold freshwater, which dissolved the limestone, creating the pores necessary to hold the oil.
“If we hadn’t been out to see the nature and touch the rocks on Svalbard, we would never have been able to create this context,” Roennevik said.
Lundin plans to drill one of two or three Gohta appraisal wells next year and “a couple of wells a year” in the Loppa area, where it’s the operator on five other licenses, for the next five to eight years, Sanness said. The company plans to maintain a $400 million to $500 million exploration budget for Norway next year and keep drilling at this year’s pace, which will see Lundin sink as many as 18 wells, including 10 exploration wells.
The Gohta find was announced days after OMV AG said it had discovered as much as 160 million barrels of oil at the Wisting prospect in another part of the Barents Sea. The discoveries, and especially the new play proved by Gohta, could revive interest in Norway’s Arctic after Statoil ASA decided to delay the development of its Johan Castberg twin finds 65 kilometers from Gohta because of rising costs, tax increases and lower resource estimates.
Norway’s Barents Sea is thought to hold as much as 7.9 billion barrels of oil equivalent in undiscovered resources, an estimate that will now be raised, Inger-Helene Madland, a geologist at the Norwegian Petroleum Directorate said in an Oct. 2 interview. It’s not certain the implications of Lundin’s find will be reflected in an update next year, she said, declining to estimate how big the upgrade could be.
A joint development of Gohta and Castberg could boost the commercial viability of both projects, Sanness said.
“It’s one of the scenarios that have to be discussed,” he said. “It’s not impossible that we would sit down for a talk with Statoil at some point.”
Statoil has yet to drill two of four wells in a 30 kilometer radius of Castberg in a bid to boost resources currently estimated at between 400 million and 600 million barrels of oil, and said it was too early to speak of joining up with Lundin.
“This isn’t very realistic at the moment,” spokesman Oerjan Heradstveit said in an Oct. 1 interview. “But you can never know.”
--Editors: Will Kennedy, John Viljoen