David J. Knott
Senior Editor
Two recent oil discoveries west of the Shetland Islands by BP Exploration Operating Co. Ltd. have fired enthusiasm for the most hostile of Britain's remaining offshore frontiers.
In March 1993, BP disclosed discovery of a 250-500 million bbl oil field in the North Atlantic area termed West of Shetland by the U.K. petroleum industry. Discovery of the field, later named Foinaven, caused the greatest stir in years among British explorationists.
By the time BP repeated the success early this year with disclosure of the nearby 250-500 million bbl Schiehallion oil discovery, speculation about prospects West of Shetland had reached fever pitch.
A number of projects are under way that will shape the future of what previously had been considered a deepwater, low priority area plagued by rough weather. Among them:
- BP is expected to announce this summer a decision on how Foinaven field is to be developed. It would be the first field West of Shetland to undergo development.
- Seismic surveys this year are expected to guide future exploration and appraisal drilling.
- The Faroe Islands are set to join the action, with a seismic survey of the Faroes shelf expected to lead to a licensing round.
- Plans for U.K. exploration licensing are expected to open more acreage West of Shetland.
Britain's Atlantic frontier-the West of Shetland area in particular -is dominating Northwest Europe's offshore news at the moment, but momentum has taken a long time to build.
EXPLORATION HISTORY
First licensing of acreage in the Atlantic frontier area took place in the third U.K. offshore licensing round of 1970. First acreage in the West of Shetland basin was offered in the sixth offshore round of 1978-79.
Now 92 blocks are under license in the U.K. Atlantic frontier, although many have been relinquished after unsuccessful exploration campaigns.
The blocks are operated by 15 majors, six of which hold more than 10 operatorships apiece: Amoco (U.K.) Exploration Co., BP, Conoco (U.K.) Ltd., Mobil North Sea Ltd., Texaco Ltd., and Total Oil Marine plc.
Esso Exploration & Production U.K. Ltd. spudded the first Atlantic frontier wildcat in 1972, on Block 206/12. From then until the end of 1993, 105 wells were drilled in the region.
Smith Rea Energy Analysts Ltd., Canterbury, U.K., reckons that 20 operators have drilled in the Atlantic frontier, with more than half the wells drilled by BP or Shell U.K. Ltd.
Smith Rea says that, disregarding oil and gas shows, there have been 10 oil or gas discoveries West of Shetland, of which five are considered significant.
Besides the 10 discoveries disclosed so far, 37 of the region's wells remain tight holes.
"There may be other yet undisclosed discoveries which may appear now that BP has started planning development of the first field likely to be brought on stream in the Northwest Frontier," the analyst said.
CLAIR FIELD
BP's Clair field was the first apparent commercial discovery West of Shetland. It lies on Block 206/8 where water depth is 460 ft. There have been 19 wells drilled on Clair's structure, with numerous seismic surveys and feasibility studies conducted.
Smith Rea believes Clair may be the largest U.K. field in terms of stock tank barrels of oil initially in place, which is estimated at more than 4 billion bbl. However, recoverable reserves are pegged at 150-300 million bbl of 25 gravity oil.
"The crude is heavy, but this is not the main reason Clair has not yet been developed," Smith Rea said. "The principal problem is the complexity of the reservoir structure and uncertainty concerning flow rates."
Recent appraisal of Clair includes two wells drilled in 1992. One drilled by BP flowed 7,300 b/d, limited by equipment. Another drilled by Esso flowed a maximum 2,545 b/d but served only to confirm the complexity of the reservoir.
Later in 1992, BP commissioned Victoria Oilfield Development Ltd., London, to study options for Clair development. Tankers and converted semi-submersible drilling rigs were considered, with a converted tanker then thought to be the most likely choice on economic grounds.
Wood Mackenzie Consultants Ltd., Edinburgh, predicts a pilot production test is likely to be carried out in Clair field in the mid-1990s.
"Full production could then proceed, possibly using a converted semisubmersible rig or a floating production vessel and offshore loading," Wood Mackenzie said.
BP'S HOT RUN
In March 1993, BP unveiled test results for its Block 204/24a-2 appraisal well in the Faroe-Shetland basin. The well was spudded Sept. 9, 1992, by the Ocean Alliance semisubmersible rig in 1,600 ft of water.
This well was drilled 3 miles east of the 204/24a-1 discovery well. The first well, drilled in October-November 1990, cut a thin oil and gas column and was not tested.
The second well, drilled to 9,295 ft, cut 160 ft of oil bearing sand. This discovery, later named Foinaven, was said to be the largest U.K. strike in 5 years and set the British oil industry buzzing.
The well flowed 3,800 b/d of 25 gravity oil through a 1 in. choke. Gas:oil ratio was 246:1. BP said its initial estimate of reserves was 250-500 million bbl of oil.
John Browne, BP Exploration chief executive, said at the time of the announcement, "The discovery has the potential to open a significant new play in the West of Shetland province, although there is substantial further work to be done to evaluate its size."
As possibilities arising from the Foinaven discovery began to hit home, there was growing speculation about BP's Block 204/20-1 wildcat drilled 35 km from Foinaven.
The 204/20-1 well was completed Oct. 30, 1993, after 46 days of drilling by the Ocean Valiant semisubmersible in 1,300 ft of water. BP completed the well as a tight hole. Speculation mounted as the well was tested late last year.
An Aberdeen newspaper predicted that a 1 billion bbl plus oil field had been found. More conservative newspapers said the find would be closer to the size of the Foinaven discovery.
A few weeks later, early in February, the conservatives were proved right, when BP disclosed that the 204/24-1 well found a field with estimated oil reserves of 250-500 million bbl. The field was named Schiehallion.
FOINAVEN BIDDING
When BP disclosed Foinaven's details, it was said the Foinaven find could be developed by a 100,000 b/d capacity floater within the next few years, with development drilling expected to start in 1994.
BP and license partner Shell have since been discussing with contractors the options for floating production systems with loading into shuttle tankers.
A floater/tanker development is seen as an efficient, low cost, first stage development project for the area. Later developments may include fixed platforms and an export pipeline.
In March, BP invited tenders from three combines of contractors for detailed engineering studies for development of Foinaven.
The combines were Brown & Root Ltd., Reading & Bates (U.K.) Ltd., FMC Corp. (U.K.) Ltd., and Single Buoy Moorings Inc.; McDermott International Inc. and Golar Nor Offshore AS; and Kvaerner AS, FSSL Ltd., and National Oilwell (U.K.) Ltd.
Foinaven development options have caused as much speculation as the Schiehallion discovery. The three contractor groups, which submitted their proposals at the end of May, are engaged in detailed discussions with BP.
The three proposals are believed to be different. Because of the continuing discussions with BP, none of the groups is revealing details of its bids. BP says it may have an announcement on the development plan in July.
Smith Rea's analysis of development options concluded that a monohull floating production, storage, and offloading vessel is the most economic option for a field like Foinaven.
"Only the monohull FPSO is below the $4/bbl target set by BP's John Browne for development on the Northwest Frontier," the analyst said.
With a short development time scale likely, conversion of a semisubmersible rig is thought to be one option. Another is use of the speculative newbuild production semisubmersible Spirit of Columbus, near completion in an Italian shipyard.
A Kvaerner company magazine said the contractor prequalified for Foinaven bidding with a concrete semisubmersible concept. An article said the design would allow mating of deck and hull within 11 months of construction start-up.
BP'S EXPLORATION
BP last year carried out the world's largest site survey over its West of Shetland prospects in Quadrant 204. BP decided to gather 3D seismic data and conduct a survey of potential drilling hazards at the same time.
Geoteam U.K. Ltd. won a contract to carry out simultaneous data gathering using the Geosurveyor vessel from June to October. The survey covered 900 sq km and included 6,000 line km of 3D data acquisition using five sensors.
A small seismic source was chosen for the site survey so it would not interfere with 3D data collection and yet be capable of mapping potential drilling hazards to the depth of interest.
BP has evaluated in-house a part of the Geoteam survey data gathered last year. Drilling of this year's wells will be based on that evaluation.
Geoteam is expected to begin further site surveying work for BP this summer over an area adjacent to last year's survey of the Foinaven and Schiehallion sites. Timing and line kilometer requirements have not yet been set.
BP plans to drill six wells West of Shetland this year. The Sovereign Explorer semisubmersible rig arrived in the area in late February. It was joined by Ocean Valiant, the rig that drilled the Schiehallion discovery, in late May.
The second and third of BP's 1994 wells are drilling ahead, both appraising the Foinaven discovery. Sovereign Explorer spudded the 204/24a-4 well May 19, while Ocean Valiant spudded the 204/24a-5 well June 3.
STRONSAY PLANS
Mike Long, Amerada Hess Ltd. exploration manager for West of Shetland, said his company is taking two discrete approaches on its operated acreage.
In 1990, Amerada discovered a Block 205/26 oil field known unofficially as Stronsay, after an Orcadian island. Although Amerada has not disclosed an estimate of Stronsay reserves, a 100-250 million bbl reservoir is thought most likely.
Amerada also recently acquired Block 205/26a 3D seismic data, which is being interpreted. Long expects this to lead to a definitive appraisal drilling program in 1995.
Amerada also operates Block 204/25a, an east offset to the BP block holding the Schiehallion reservoir. The Schiehallion strike lies less than 2 km from Amerada's block boundary.
Amerada is conducting a major geological and geophysical interpretation of seismic data in the hope of proving an extension of Schiehallion field into Block 206/25a.
"If an extension exists, we will drill this year," Long said.
Amerada also is working on plans for joint development of its Stronsay field with Schiehallion.
Long said, "Because Stronsay lies in 410 ft of water and Schiehallion lies in 1,300 ft of water, we could use conventional technology on Stronsay and tie in Schiehallion.
"Total reserves in the area could be very large. They might be large enough to support a pipeline, in which case a platform could be built in the shallow water in Stronsay. However, we are looking at all development options, including floaters."
NEW SURVEYS
Digital Exploration Ltd. (DEL), East Grinstead, U.K., last January completed a speculative 2D seismic survey in anticipation of a rush for data on the West of Shetland frontier.
DEL acquired more than 1,500 line km of seismic records, along with gravity and magnetic survey data. The geophysical survey covered unlicensed acreage in Quadrants 213, 214, 204, 205, and 206 and open acreage to the southwest.
The survey did not include the acreage licensed to BP and Shell, although it was said to go right to the boundaries of the BP and Shell tracts (see map, OGJ, Jan. 24, p. 20).
Data from the survey were processed by GAPS Scott Pickford Ltd., Croydon, U.K. A report is expected to be made available in July.
Geco-Prakla Exploration Services, Gatwick, U.K., is thought to have recently completed seismic survey work in Quadrant 204 on behalf of Amerada Hess.
Richard Hardman, Amerada exploration director, said his company plans to spud a well West of Shetland in July. Amerada also will participate in one and possibly two wells to be drilled this year on a block operated by Texaco Ltd.
Geoteam expected to complete this month a 2D seismic survey on behalf of a group of operators believed to be major players West of Shetland. Geoteam declined to reveal details because the project was proprietary.
The survey was carried out using the Akademik Shatskiy vessel. A Geoteam official said data will be processed by yearend.
Geoteam also plans to acquire 500 line km of 2D seismic data in Quadrant 209. This will be a speculative survey covering acreage that may become available in the planned 16th offshore licensing round.
U.K. Energy Minister Tim Eggar last April issued a call for nominations from oil and gas companies on blocks they want offered under a 16th licensing round.
This will cover "submature" areas, including West of Shetland, the central North Sea from the Scottish coast east to mature acreage, coastal stretches alongside the southern gas basin, the Irish Sea southeast of the Isle of Man, and the English Channel. Nominations are required by July 26.
Eggar expects to announce this autumn the blocks to be offered in the 16th round. Applications for acreage will be required by March 1995, with a view to license awards in summer 1995.
FAROE ISLANDS
In February the Faroe Islands, a Danish dependency northwest of the Shetland Islands, asked for bids for seismic surveying of the Faroese continental shelf.
This marked the Faroes government's determination to cash in on success on the U.K. side of the deep channel separating the Faroes from the Shetlands.
The Faroese believe the oil bearing structures on the U.K. side of the channel extend into the Faroes continental shelf.
The Faroese government has set up a department to organize exploration of the Faroes shelf. An exploration licensing round is expected to follow the surveys, although dates have not been decided.
In April the Faroese government awarded Western Geophysical Corp., London, two seismic survey permits covering all the prospective offshore area around the Faroe islands (see map, OGJ, May 2, p. 138).
Western's permit involves 190,000 sq km inside the islands' 200 mile territorial boundary. Obligations include acquisition of 12,000 line km of 2D seismic data, magnetic and gravimetric data, and a vertical seismic profile of an onshore well drilled in the 1980s.
Steve Butler, Faroes survey project manager at Western, said June 9 the Sea Star survey vessel was expected to dock at Ireland's Cork Harbor that day. There it would pick up crew and equipment for the Faroes survey.
First task for the Sea Star is acquisition of six lines of Faroes test data.
The onshore 1 Lopra wildcat well profile was to be acquired starting June 17. This was expected to take 23 days. Then, on June 20 or 21 the first part of the 2D seismic survey was expected to begin.
"We will shoot 7,000 line km this year," Butler said. "This will take 3-4 months, depending on weather. Next year we will acquire the remaining 5,000 line km of data."
Butler said Western has received "lots of interest" in the survey from major operators. Some were said to be seriously considering precommitting to buy the data.
Most of the U.K. operators active West of Shetland are thought to have been in discussions with Western about the survey. Norway's Den norske stats oljeselskap AS is believed to have expressed interest and sent a delegation to visit the Faroese government just after announcement of plans for the survey.
PROSPECTS
Smith Rea expects BP to achieve first West of Shetland oil production, possibly in 1996, at a rate of 60,000-100,000 b/d from Foinaven field.
Smith Rea said West of Shetland production could reach 500,000 b/d of oil by 2005 from as many as seven fields. This is forecast to be about one third of U.K. production by that time.
"Phased development beginning with early production, and perhaps extended well tests, will probably give way to area development schemes culminating in the construction of a fixed infrastructure," the analyst said.
Smith Rea expects production to reach 300,000 b/d about 2002, at which time a new oil pipeline will become a commercially viable option. A floater would not be able to handle the 30 in. diameter pipeline envisaged, so a fixed structure would have to carry a riser and pump station.
If the pipeline platform were also a production facility for one of the fields, Amerada's Stronsay strike in Block 205/26a would be a strong candidate because it is in only 150 m of water and on the way to Flotta terminal in the Orkney Islands, Smith Rea said.
GAS RESOURCES
Smith Rea says gas discoveries in the West of Shetland region have been ignored because there are no conceivable commercial outlets for the small volumes involved.
Texaco found Victory field, the only significant gas discovery in the region, in 1977 with its third well on Block 207/1a. The 207/1a-3 well was reported to have flowed 9.2 MMcfd, after which little interest has been shown in further appraisal of the field.
A tie-in of Victory field to the Flags pipeline 200-250 km away or laying a new pipeline to St. Fergus, Scotland, are seen as the only options.
The analyst sees hope for Victory development in uncertainty over volumes of associated gas in Quadrant 204 and 205 discoveries.
"Some suggest that if an oil pipeline is built a gas pipeline will be built," Smith Rea said. "If this gas could share the costs of a spur to Flags with the southern associated gas, its exploitation would be brought significantly forward."
WHAT'S AHEAD
Arthur Andersen & Co., London, reckons that despite the increasing interest shown by U.K. operators in frontier blocks following BP's West of Shetland discoveries, there is unlikely to be a rush into the area.
"Yhe majority of the acreage is already accounted for by oil majors BP and Shell, plus the costs of drilling in such deep waters would make it difficult for certain consortia to sustain the cost of a dry hole," Andersen said.
"Described by the government as 'a new exploration basin with the true potential for more elephant finds,' it will still require continued exploration success to attract a significant number of players to its high risk/high cost waters."
Wood Mackenzie is more optimistic, saving development of the region will depend on ability of oil companies to work with one another and with suppliers in settling development issues.
"If this can be achieved," Wood Mackenzie said, "the U.K. oil industry can look forward to the turn of the century with confidence of a third major province set to maintain levels of upstream activity."
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
