22 Offshore June 2016 • www.offshore-mag.com
DRILLING & PRODUCTION Robin Dupre • Houston
Breaking even in an
uneven oil market
Douglas-Westwood reported that the
Johan Castberg development has faced nu-
merous challenges since inception. “If pro-
duction in the Barents Sea wasn’t difficult
enough, Statoil has had to contend with
changes to Norwegian tax laws as well as
disappointing drilling results,” said Mike
Green, Douglas-Westwood London.
In May 2014, it was confirmed that of five
exploration wells drilled in the area, only two
yielded oil reserves: the Skavl and Drivis
fields. This initially challenged the viability
of commercial development, however, it now
appears Statoil may have found a solution.
Low oil prices have pushed back Johan
Castberg’s onstream year considerably. In
the current climate, development of such a
technically challenging field – in the hostile
waters of the Barents Sea – might seem an
impossible proposition. However, against
the odds, it appears the project could go
ahead with first oil in 2022. Statoil’s CEO
recently stated production costs at the field
have been nearly halved since the oil slump,
which raised the question – how?
Construction costs have dropped con-
siderably since the downturn, with EPC
providers bidding aggressively on the few
contracts available. Yet with oil prices re-
maining low, reduced contractor rates are
not enough to ensure the viability of com-
plex projects. Put simply, a pragmatic ap-
proach to developments is needed. Costs at
Johan Castberg have been cut by reducing
the number of planned production wells and
choosing a single FPSO rather than an FPSS
and pipeline – reducing the break-even price
for the field from ~$80 a barrel to ~$45.
The story is remarkably similar to that of
Mad Dog Phase 2 – another field that has ar-
guably suffered from over-engineering and
has endured numerous development plans:
A spar, TLP, and an FPSS were all consid-
ered by BP, before committing to an FPSS
– later canceled due to inflated costs. With
lower supplier costs and a company focus
on re-engineering BP has managed to make
the project commercial, bringing the break-
even price down from ~$110 a barrel to ~$50.
“Both fields demonstrate that even in a
low oil price environment, complex fields
can still be developed by utilizing a pragmatic approach. Keeping costs at a manageable
level over the next cycle will be the challenge – when the oil price recovers will the
industry revert to its old ways?” Green said.
Halliburton to support
Wintershall Norge has awarded Hallibur-
ton a four-year service contract to support
its exploration and development projects off-
The two companies have started collaborating on detailed engineering work prior to
the start of drilling for the Maria development on the Haltern Terrace in the Norwegian Sea during the first half of 2017.
Early next year, Halliburton will provide
services supporting the drilling of six development wells on Maria’s subsea templates
located at a depth of around 300 m (984 ft).
The contractor will provide drilling services and associated tools, drilling and completion fluids, cementing, and coring, with
an option for P&A services.
Maria’s two templates will be linked via a
subsea tieback to the Kristin, Heidrun, and
Åsgard B production platforms. The well
stream will head to Kristin for processing
with Heidrun supplying water for injection
into Maria’s reservoir.
Åsgard B will provide lift gas via the
Tyrihans D field subsea template. The processed oil will be shipped to the Åsgard field
for storage and offloading to shuttle tankers,
while the gas will be exported via the Åsgard Transport System pipeline to Kårstø.
Maria is 20 km ( 12. 4 mi) east of the Kristin field and 45 km ( 28 mi) south of the Heidrun field.
Analyst finds mixed results
in latest permits report
Evercore ISI’s US Drilling Permit Monthly
report of April 2016 found a total of 13 new
offshore permits, which it found to be “on par
with the March and February figures.” However, the total is down 28% from April 2015.
The analyst firm’s Oilfield Services, Equip-
ment & Drilling group monitors all US permit
data for land and offshore drilling activity for
the monthly report, as it believes the informa-
tion to be “a leading indicator for near-term
New bypass permits halved from eight to
four, an indication of better execution in new
well drilling and development, it found. Simi-
larly, new well permits grew 50%, from four
in March to six in April.
Although ultra-deepwater permits have remained constant, this number did not necessarily reflect the full picture the sector faces,
Evercore warned in the report.
“New ultra-deepwater and midwater permits
increased month-to-month, but have fallen 50%
year/year. Ultra-deepwater permits have remained relatively consistent due to their infrequency, although ultra-deepwater plans have all
but evaporated heading into 2Q 2016,” it said.
Other data indicators provide more mixed
results, with at least one other result showing some cause for concern.
However, the sharpest decline year-over-year since 2014 has been in shallow-water
permitting, the group found, down 89% from
this time last year, with three total new permits were issued for shallow water wells,
down 93% from 2014.
“Offshore drilling will continue to show
anemic movement as long as shallow-water
permits remain at historically low levels,”
The analyst noted that total permit numbers
(from both onshore and offshore) eclipsed the
2,000 mark for the first time in 2016: 2,106 total
US permits in April mark the third sequential
monthly increase, as seasonal activity gains
momentum heading into the summer.
Last year saw a permit low of 3,102 in December, so May 2016 would have to show
34% growth just to reach the 2015 monthly
bottom, Evercore noted. May permit numbers are on pace to match April totals, with
510 permits issued through May 9.
Eni aims for fasttrack
growth from Nooros field
Eni has increased production from its
Nooros field just offshore northern Egypt to
This follows the start of production of
the Nidoco North 1X exploration well and
the Nidoco North West 4 development well,
both drilled under the sea from the onshore
Abu Madi West concession in the Nile Delta.
Eni only discovered Nooros last July. The
company’s next target is to ramp up production to 140,000 boe/d by the end of 2016
through drilling of additional wells and facility
optimization. Produced gas and condensates
are sent to the Abu Madi treatment plant,
about 25 km ( 15. 5 mi) from the discovery,
then routed to the Egyptian network.
At the same time, the company plans to
continue exploration activities in the license
area, where it has identified further potential.
Eni has a 75% stake in the concession via its
subsidiary IEOC, BP holding the remaining
25%. Petrobel, a joint venture between IEOC
and Egyptian General Petroleum Corp., is
leading operations. •
The Maria field will become Wintershall’s first
operated discovery. (Image courtesy Wintershall)