Exploration activity

In 2016, 36 exploration wells were spudded on the Norwegian continental shelf and 18 discoveries were made. The resource growth from these discoveries was about 58 million standard cubic metres of oil equivalents. Most of the new discoveries are small and near existing or planned infrastructure.
In 2016, 36 exploration wells were spudded on the Norwegian continental shelf and 18 discoveries were made. The resource growth from these discoveries was about 58 million standard cubic metres of oil equivalents. Most of the new discoveries are small and near existing or planned infrastructure.
Undiscovered resources Resource growth Exploration companies

New commercially viable discoveries will be necessary to ensure the continuation of regular activities in the time ahead. This means maintaining exploration activity at a high level. It will also be important to make new discoveries in mature areas where established infrastructure is still in place. Effective use of existing infrastructure makes it more likely that socially profitable resources will be produced.

Undiscovered resources per sea area

The Storting (Norwegian parliament) has opened most of the North Sea, the Norwegian Sea and the Barents Sea South (including Southeast) for petroleum activities.

The Norwegian Petroleum Directorate has estimated the undiscovered resources on the Norwegian shelf at approximately 2.9 billion standard cubic metres (Sm3) of recoverable oil equivalents. This corresponds to around 39% of all the remaining resources on the shelf.

Around 39% of all remaining resources on the shelf are still undiscovered

Undiscovered resources are split as follows between the different sea areas: 24% in the North Sea, 27% in the Norwegian Sea and 49% in the Barents Sea.

Undiscovered resources by area

Updated: 21.02.2017

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The figures in each column show expected recoverable volumes not yet discovered at year end. The uncertainty in the estimates is shown in the slanted line; low estimates on the left, high estimates on the right (Source: Norwegian Petroleum Directorate).

Undiscovered resources by area as of 31 December 2016
Source: Norwegian Petroleum Directorate

Resource growth from new discoveries

Both large and small exploration companies have contributed to the strong resource growth in the last few years. Resource growth was particularly strong in 2010 due to the Johan Sverdrup discovery. This is the largest discovery in recent times and the fifth largest ever made on the Norwegian continental shelf. It was made in an area that has been regularly explored since the mid-1960s, and shows the considerable potential in exploration of mature areas.

In 2016, 36 exploration wells were spudded on the Norwegian continental shelf. These are fewer than in previous years, mainly due to a lower oil price and cost cuts. A record was reached in 2009, when 65 exploration wells were spudded after a period of low activity up to 2006. It is expected that exploration activity will continue to decline somewhat in 2017 due to the current low oil price, and subsequently increase again in 2018/2019.

There are two types of exploration wells: wildcat and appraisal wells. Wildcat wells are drilled to explore whether there are hydrocarbon deposits under the seabed. When a discovery has been made, appraisal wells may be drilled to obtain more data about the extent and size of the discovery. Of the 36 exploration wells spudded in 2016, 28 were wildcat wells and eight were appraisal wells.

Exploration wells spudded on the Norwegian continental shelf, 1970-2016

Source: Norwegian Petroleum Directorate

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Exploration wells spudded on the Norwegian continental shelf, 1970-2016

In 2016, 18 new discoveries were made, 14 of them in the North Sea, two in the Norwegian Sea, and two in the Barents Sea. The resource growth from these discoveries was in the order of 18-44 million Sm3 oil/condensate and 12-33 billion Sm3 recoverable gas. This means that the overall resource growth from these discoveries was about 57 million Sm3 oil equivalents.

Most of the new discoveries are small and near existing or planned infrastructure, and the estimates are very uncertain at this stage.

Gross resource growth and number of wildcats (completed), 1990-2016

Updated: 21.02.2017

Source: Norwegian Petroleum Directorate

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Gross resource growth and number of wildcats (completed), 1990-2016

Accumulated resources on the Norwegian continental shelf, 1966-2016

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Source: The Norwegian Petroleum Directorate

Accumulated resources on the Norwegian continental shelf, 1966-2016
Source: Norwegian Petroleum Directorate

About 330 wildcat wells have been spudded on the Norwegian shelf between 2007 and 2016. 170 of these resulted in discoveries. These numbers show that the success rate per wildcat well is more than 50%, which is high by international standards.

Diversity and competition on the shelf

A number of the major international companies have a key position on the Norwegian shelf, since they have the expertise and financial resources that has always been needed to undertake large and complex developments.

As further areas have become mature, new and more varied challenges have arisen and the numbers and types of companies engaged in oil and gas activities on the Norwegian shelf have changed. Entry barriers to exploration on the Norwegian shelf are generally low, which encourages a diversity of companies and promotes competition. The reimbursement system for exploration costs has been a contributory factor, as have high oil prices, the availability of interesting areas for exploration and good exploration results in the past ten years.

Exploration costs in production licences according to the size, and number of companies, 2000-2016

Updated: 13.03.2017

Source: Norwegian Petroleum Directorate

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Exploration costs in production licences according to the size, and number of companies, 2000-2016
What is the reimbursement system for exploration costs?

The reimbursement system was introduced in 2005 to reduce the entry barriers for new actors and encourage economically viable exploration activity.

Under this system, companies that are making a loss may choose between requesting an immediate refund of the tax value of exploration costs from the taxation authorities and carrying forward the losses to a later year when the company has a taxable income. If a company chooses the immediate payment option, the exploration costs cannot be deducted from income in later tax assessments.

This system ensures that the value of the tax deduction is the same whether or not a company is liable to pay tax, and that all companies are treated equally.

It takes a long time from a discovery is made until it is developed and put in production. 10-15 years is not uncommon. Carrying forward losses all these years is financially challenging for the companies. The reimbursement system is therefore important for companies that are not yet liable to pay tax.

New exploration companies have been especially prominent in APA rounds, where blocks in mature areas are announced. Exploration in frontier areas, on the other hand, is mainly carried out by the larger companies. The little known geology increases the potential for discoveries, but greater challenges may be met during exploration, development and production.

Exploration costs include costs related to seismic data acquisition to map potential petroleum deposits under the seabed and to drilling exploration wells. In 2016, preliminary estimates of exploration costs on the Norwegian shelf totalled about NOK 22 billion.

Oil price, number of companies on the shelf and spudded exploration wells at year end, 2000-2016

Updated: 13.03.2017

Source: Norwegian Petroleum Directorate

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Oil price, number of companies on the shelf and spudded exploration wells at year end, 2000-2016
Updated: 13.03.2017