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Lloyds List: Oil activity back in the picture

By: Drilling of the Brugden prospect has revived the region’s exploration efforts, Lloyds List
Published: Oct 30, 2006

AFTER a flurry of activity in the 1990s, offshore drilling around the Faroe Islands had been all but dormant until this summer when Norway’s Statoil group spudded an exploration well on its licence 006 on the Brugden prospect.

The well was drilled by the Stena Don drilling rig, a semi-submersible capable of drilling in harsh waters up to 1,640 ft in depth. The well results were mixed as it did not find new reserves, but did give indications of future drilling potential.

In addition to this well, one well will be drilled by the group next summer in the exploration block licence 007 and one well in 005 in 2008. These wells are either part of the work commitments of the Faroes first licensing round.

Interest in the offshore waters around the Faroes started when the first seismic vessels surveyed the area in 1994. This continued through the First Licensing Round, held on the back of an immense optimism in 2000, and a drilling campaign which yielded positive results, although it did not live up to the optimism.

However, there are still technological challenges to exploring the Faroe Islands, particularly the technical impossibility of mapping structures below more than 1 km of basalt.

The first round provided seven licences to 12 oil companies, organised in five groups. The awards were made by the predecessor of the Faroese Earth and Energy Directorate or Jardfeingi, which represents the government in oil and gas affairs.

The second licensing round was launched on August 17, 2004 in a bid to develop the first-round work.

Statoil was initially committed to drill on blocks 001 and 003 from the first round, but these commitments have been waved in lieu of promises made with regard to 006 following poor results from the Longan well drilled on 003 and Marjun well on 001.

A leading locally nurtured company is Faroe Petroleum or Foroya Kolvetni, which has interest in five offshore exploration licences in Faroese waters. Licences 002 and 005 were awarded through the First Faroese Licensing Round in 2000 in a joint venture with Eni, while 009 and 012 were won through the Second Faroese Licensing Round in 2005.

The two licences awarded under the First Licensing Round are located in the southeasterly corner of the Faroese territorial waters, bordering the UK close to the major producing oil fields Foinaven and Schiehallion. The company also has an interest in 006 and is waiting for news on the drilling.

Earlier this year, Faroe Petroleum raised around GBP25m ($44m) through a share placing on the London stock exchange to fund an exploration drilling campaign in the next two years.

The firm, listed on the Alternative Investment Market, is hoping to expand operations in offshore the Faroes, in the Atlantic Margin and central North Sea over the next 18-24 months.

‘We are well positioned to undertake the next stage of our business strategy, which includes the drilling programme, the continued maturing of our licence portfolio and expansion into Norway,’ says chief executive Graham Stewart.

BP and Shell have agreed with Anadarko Faroes Company, the sole licensee on 007, on drilling an exploration well within the 007 area to test the ‘William’ prospect. The two supermajors farmed into the licence with BP taking on the role of operator.

Earlier this year, agreement was reached on 005 with Italian operator Eni that extends the operatorship of the block until 17 August 2009 on the condition that an exploration well is drilled in the licence area.

Italy’s Eni operates the license and holds 75% of the license alongside partner Foroya Kolvetni (25%).

Minister of trade and industry Bjarni Djurholm says: ‘This is an important agreement as it secures further exploration activity on the Faroese Continental Shelf over the next two to three years.

‘It is also satisfactory that exploration wells will be drilled on all nine-year licences awarded in the first round. This supports the strategy of including acreage in the round that at the time was considered difficult.’

Oil companies operate supply vessels, during any exploration work from Runavik port on the island of Eysturoy.

Construction work on a supply ship for Thor Offshore Shipping due for delivery towards the end of 2007 is taking place in Faroes yard of Torshavnar Skipasmidja in Skala.

Unusually, foreign sub-contractors will make the hull locally. Thor chief executive Han Andrias Joensen says there are several advantages to allowing the whole of the ship to be made in Faroes.

‘Even though the ship is more expensive than in China or Spain, it is better to build it here. We know that the Scandinavian standards are higher and that the Faroese shipyards gain good experience.’

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