After years of waiting for the moment, Faroe Petroleum expects to get two cracks at drilling the UK Atlantic Frontier this summer.
The first is as a partner in OMV’s Tornado oil&gas prospect, the drilling of which should start in July. The second is Glenlivet, which operator DONG will spud in the autumn and where the target is gas.
OMV will drill Tornado using the fifth-generation semi-submersible, Leiv Eiriksson, on sub-let from Shell. DONG will drill its well using the rig, Transocean Rather, which is a seasoned campaigner on the frontier.
As reported in Energy last month, Shell is also to drill again on its South Uist prospect this summer following problems with last year’s attempt – about which the company has said very little.
While Shell was cagey as to whether its well would drill ahead of or after Tornado – and the bet is on before as the rig is scheduled to go on contract to Petrobras in September – the super-major says this is not contingent on farming down its stake first.
The pressure is on Shell and OMV to get moving as, once it goes on contract to Petrobras, the Leiv Eiriksson will be leaving UK waters for the Black Sea.
The three-year term includes mobilisation, disassembly and re-assembly of the derrick structure for transit through the Bosporus Strait. The $630million contract is expected to start as soon as the current one with Shell expires.
Tornado (straddling blocks 204/13 and 204/14) lies in more than 1,000m of water (more than 3,300ft). It is reckoned to be a 100million barrels target, but could be larger.
Success would probably pave the way to reviving the nearby, but moribund, Suilven oil discovery of the 1990s.
“While it could surprise and turn out to be much larger, the money is on a modest find,” said a source.
The Japanese stakeholder in the licence, Idemitsu-Kosan, is more optimistic, saying in a statement that “sizeable oil reserves are expected”.
Both Tornado and Suilven are within tie-back distance of BP-operated Schiehallion oilfield infrastructure, though a standalone development might be possible, assuming sufficient collective resources.
Rock physics and AVO studies based on nearby well control points to the presence of oil rather than gas in what is described as a stratigraphic trap. Mapping has been conducted using both 3D and new long-offset 2D data. A strong seismic response was evident.
In addition, a controlled-source electromagnetic survey was shot over Tornado in 2006 by EMGS which also gives positive indications of the presence of hydrocarbons.
Accordingly, analysts have attributed a low to moderate risk of finding hydrocarbons to the prospect. The oil is thought to be similar to Schiehallion and to have a significant gas content.
The so-called P10 recoverable resource estimate stands at 176million barrels oil equivalent. That means the chance of finding that volume of hydrocarbons is just 10%, whereas the P50 (mean) figure is in the range 90-100million barrels.
However, there is scope for additional upside potential in the nearby Spitfire lead – perhaps about 27million barrels equivalent.
Success with Tornado should help reduce the drilling risk on other nearby prospects, including a few miles away in Faroese waters. Both Faroe and Dana have significant Atlantic Frontier holdings, but have yet to reap tangible reward from this acreage. Stakeholders comprise Austria’s OMV (50%); Dana Petroleum (30%); Faroe Petroleum (10%), and Idemitsu-Kosan of Japan (10%).
Idemitsu joined the partnership via a farm-down by Faroe. It is underpinned by JOGMEC (Japan Oil, Gas and Metals National Corp), a Japanese government-backed body which said last month that it would back Idemitsu’s UK effort by investing about one billion yen (£7million) from now through 2012. There would appear to be scope for a further widening of the consortium as OMV has, since last year, been trying to reduce its risk, too, by offering, via the Indigopool service, up to 20% of the licences that Tornado straddles.
Turning to Glenlivet, this is reckoned to hold reserves of about 500billion cu ft of gas. It lies north of BP-operated Clair and close to Victory, an early West of Shetland gas discovery made originally by Texaco but which has never be fully assessed with a view to possible exploitation.
Faroe Petroleum notes that Glenlivet is just 15km (nine miles) from the proposed Laggan gas export pipeline to Sullom Voe. Moreover, Glenlivet “is an analogue to other undeveloped gas discoveries in the vicinity”.
Faroe adds that a discovery at Glenlivet could become a significant part of the planned new UK gas gathering system for West of Shetland, for which Laggan is the focal point.
Glenlivet operator DONG E&P is also a 20% equity partner within the Laggan, which is led by Total.