On April 22, it was reported in Calgary that executives at Suncor Energy are to assume the top roles in the company after it wraps up its $15billion (£11million) takeover of Petro-Canada.
Suncor CEO Rick George will lead the merged company, while Petro-Canada CEO Ron Brenneman will be vice-chairman of the new entity.
This has to be good news for Petro-Canada’s North-west Europe regional manager, John Scrimgeour; Brenneman because he has presided over the growing success of that business unit, and George because he is an old North Sea hand and managed Sun Oil’s North Sea business out of Aberdeen in the 1980s.
And besides, George will be keen to dismiss the “one-trick pony” branding that Suncor has earned because of its exposure to the oil-sands sector, which is currently struggling – witness more than 650 jobs being shed.
However, Petro-Canada’s North Sea business appears robust and to be motoring rather nicely despite $50 oil. So the guess is that Calgary will nurture this business.
Petro-Canada entered the North Sea via its 2003 acquisition of Veba Oil & Gas and, eventually, Scrimgeour, who had earlier worked with George, was hired to run the newly created business unit.
Scrimgeour laughingly told Energy that he wasn’t in the first wave of applicants but that he got the job because he had the operated-asset experience needed.
“I came up in the second wave of interviewees … about six months into the European adventure I joined,” he said.
When Scrimgeour signed up, there was clearly a need to develop a strategy – was this about managing decline or searching for growth? At first, it seemed like decline, but history tells us otherwise.
“Yes, it was, in a way, managed decline. The strategy wasn’t clear and they were looking to develop one. My first job was to come up with one,” he said.
Basically, there was only one real option, grow the business – and he has.
“We’ve grown from a business that started when we took over in NW Europe of around 50,000 barrels per day and the prognosis was to be producing around 20,000 about now,” he said.
“However, we’ve been very successful, not only in the core business that we had then but also in acquiring Buzzard, and our production now is near 100,000 barrels per day. So double the business.”
The package acquired from Veba was largely non-operated and mostly split between the UK and Dutch sectors of the North Sea.
“What we did first was set out to realise the value of what we had, especially in Holland and, to a lesser extent, the UK, though we also had interests at that time in Faroe and Denmark.
“The decision was taken to concentrate on the core areas … three in Holland and three in the UK. We traded, swapped and relinquished acreage outwith those cores and that gave us leverage.”
At that time, it was clear that De Ruyter was the prize Netherlands asset while, in the UK, it seemed to be Clapham.
To take control of De Ruyter, a swap was done with BP to secure 100% of the non-government side.
“We found a way to develop De Ruyter. It was always marginal, but there are a lot of small structures around it and that’s what’s made it a great deal for us. It was marginal when we sanctioned it … oil was 20 bucks a barrel, yet by the time we brought it onstream as a short-life (five to six years) project, oil was up in the $50s and climbing towards $150.
“At the time we took it over, we weren’t sure we had anything. We were thinking around 20million barrels perhaps.
“We sanctioned at 29million and we’re now looking at the low to mid 30s. We now have three successfully drilled add-ons, one with an oil leg under gas, the other two are gas; and we’re getting ready to take them to gate (approval) later this year.”
There are several more prospects around De Ruyter, and Scrimgeour reckons the prize could now be 45million, with more upside possible.
It is clear he likes the Dutch approach to oil&gas exploitation by small players.
“The big thing about Holland is the most pragmatic and straightforward approach. They have a small gas field policy, for example. If you develop a field you know how much you can produce, you get a guaranteed market and price and guaranteed access to infrastructure. No question about it. The government will also work closely with operators where exploration of marginal targets is involved.”
Shifting to the UK sector, Petro-Canada is currently placing greatest emphasis around its NW Guillemot/Triton areas and new finds located within tie-in distance of its huge Buzzard asset.
A number of wells are planned/in progress, including going back into a pair of wells drilled some years ago around Triton but which failed at the time. Problem is that the cost of such long-reach wells has rocketed from £8million to around £35-40million.
But Scrimgeour reckons the effort of re-drilling and re-completing Saxon and Guillemot will be worthwhile.
“We then have at least two 23rd Round wells … appraisal of Surprise plus two prospects, Leopard and Nutmeg. They’re located in Quadrant 13 in the Moray Firth, near Captain.
“We had four commitment wells in the 23rd Round and have drilled two. Gemini was drilled about two years ago … no hydrocarbons present, though still of interest. Then we drilled Surprise, which is a discovery (and already considered commercial). Next step with that is appraisal. Then we have Leopard off to one side and Nutmeg almost adjacent on the other side of a fault.”
Turning the Buzzard area, Scrimgeour said a series of successes – initially Golden Eagle, but most recently Hobby and Pink (See WellSlot on Page 11) – showed immense promise, but also posed a dilemma.
Might this still growing cluster be developed as a standalone package based on a floating production system, or could it tie into Buzzard when ullage becomes available? A hybrid approach is also possible – FPSO for the first few years, then tie-in to Buzzard.
The problem with Buzzard, in which Petro-Canada has a 29.9% interest via its $840million purchase from Intrepid in 2004 – and it’s a nice one to have – is that plateau production may now stretch out a further five or six years to 2016-17. That said, there is a commitment to Golden Eagle from 2015.
Petro-Canada is, of course, keen to get a return on its exploration investment.
For sure, it is reaping a great harvest from the investment in Buzzard – that was clear from listening to the enthusiasm in Scrimgeour’s voice.
“We did the deal back in 2004 when the oil price was in the low $20s. We hedged some of it at $26 a barrel to make sure we could do the deal. So $50 a barrel today is just fine.
“When we bought in, the figure we put out for 2P reserves was 560million barrels, and the latest is 688million barrels. In the North Sea, big fields typically get bigger and, as I’ve said to my boss, the best place to look for more oil is in an oilfield. Or you find ways of being able to produce more oil from the reservoirs you have. There’s a bit of both in Buzzard.”
So might Buzzard yet join the North Sea billion-barrel fields club?
“I wouldn’t be astounded myself. It’s been a great success story.
“Everything’s working, though the bugbear is that there is a higher level of HS (hydrogen sulphide) than expected, treatment of which we’ve factored into the Buzzard expansion project, which is on schedule for late-2010-11.”
Finally, and Energy will hopefully come back to this one day, Petro-Canada is breaking into Norway, with initial emphasis on the Norwegian equivalent of the UK Central North Sea.
“It’s a bit like the UK, but not so drilled up, so statistically there should be some bigger structures than here,” said Scrimgeour, adding that the Norwegian and Barents Sea were also of considerable interest.