Exploration activity

In 2021, exploration activity was at a higher level than in 2020, but at a somewhat lower level compared to 2018 and 2019. A total of 40 exploration wells were spudded and 18 discoveries were made on the Norwegian continental shelf. The discoveries have a preliminary total estimate of 85 million standard cubic metres of recoverable oil equivalents. This gives an expected resource growth approximately as it was in 2020. Discoveries in the last three years consisted mostly of oil.
In 2021, exploration activity was at a higher level than in 2020, but at a somewhat lower level compared to 2018 and 2019. A total of 40 exploration wells were spudded and 18 discoveries were made on the Norwegian continental shelf. The discoveries have a preliminary total estimate of 85 million standard cubic metres of recoverable oil equivalents. This gives an expected resource growth approximately as it was in 2020. Discoveries in the last three years consisted mostly of oil.
Undiscovered resources Resource growth per sea area Resource growth in recent years Exploration companies

New commercially viable discoveries are necessary to ensure the continuation of regular activities in the near future. This means maintaining exploration activity at a high level. It will also be important to make new discoveries in mature areas while established infrastructure is still in place and operational. Effective use of existing infrastructure makes it more likely that socio-economically profitable resources will be produced.

Undiscovered resources by 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 3.8 billion standard cubic metres of recoverable oil equivalents (Sm3 o.e.). This means that about half of all remaining resources on the shelf have yet to be proven.

About half of all remaining resources on the shelf are still undiscovered

Undiscovered resources are divided as follows between the different sea areas: 17 per cent in the North Sea, 20 per cent in the Norwegian Sea and 63 per cent in the Barents Sea.

Undiscovered resources by sea area

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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 2021
Source: The Norwegian Petroleum Directorate

Resource growth by sea area

The most attractive areas are explored first and the largest discoveries, with a few exceptions, were proven early on the Norwegian continental shelf. This is illustrated in the figure below as large increases representing Ekofisk, Statfjord and Troll, and then the curve gradually levels off. This is a normal development compared with other petroleum provinces. Ormen Lange and Johan Sverdrup prove that it is still possible to make large discoveries on the Norwegian shelf. The sea areas on the shelf have been explored to varying degrees.

Accumulated resources on the Norwegian continental shelf, 1966-2021

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Source: The Norwegian Petroleum Directorate

Accumulated resources on the Norwegian continental shelf, 1966-2021
Source: The Norwegian Petroleum Directorate

A total of 1200 wildcat wells have been drilled on the Norwegian shelf. In the North Sea, more than 790 wildcat wells have been drilled since 1966, and the vertical jumps in the figure below show that the largest discoveries were made in an early exploration phase, such as Statfjord (1974) and Troll (1979). After this, the resource growth curve levels off somewhat; in other words, the discoveries become smaller, until we see a new jump with the Johan Sverdrup discovery in 2010. After Johan Sverdrup, the graph shows steady but moderate resource growth in the North Sea.

In the Norwegian Sea, exploration activity started in 1980, and about 275 wildcat wells have been drilled up to now. Here too, the largest discoveries such as Heidrun and Ormen Lange were proven relatively early in the exploration phase, in 1985 and 1997, respectively. After Ormen Lange, there has been steady growth in resources, but with significantly smaller discoveries. Among the largest discoveries made in recent years are 6507/4-1 (Warka) in 2020, 6507/5-10 S (Slagugle) and 6507/4-2 S (Dvalin Nord) in 2021.

In the Barents Sea, exploration activity also started in 1980, but the area has considerably fewer wildcat wells (about 135) compared with the Norwegian Sea. The largest discovery so far is Snøhvit (1984). The graph shows that there have not been many large discoveries in the early exploration phase, as was the case in the North Sea and the Norwegian Sea. More than 60 exploration wells have been drilled in the last 10 years, with significant discovery success early in the period. The largest discovery in the last 10 years is 7324/8-1 (Wisting) in 2013.

Cumulative resource growth per sea area

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Source: The Norwegian Petroleum Directorate

Cumulative resource growth per sea area
Source: The Norwegian Petroleum Directorate

Resource growth in recent years

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.

A total of 40 exploration wells were spudded on the Norwegian continental shelf in 2021. More wells were drilled in the North Sea (30) than in 2020, while fewer wells were drilled in Norwegian Sea (6) and about the same number of wells were drilled in the Barents Sea (4). Based on the companies’ plans, fewer exploration wells will be drilled in 2022.

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 40 exploration wells spudded, 31 were wildcat wells and 9 were appraisal wells. It is expected that also in 2022 a majority of the wells will be wildcat wells.

Exploration wells spudded on the Norwegian continental shelf, 1970-2021

Updated: 13.01.2022

Source: Norwegian Petroleum Directorate

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Exploration wells spudded on the Norwegian continental shelf, 1970-2021

In 2021, 18 new discoveries were made, 12 of them in the North Sea, three in the Norwegian Sea and three in the Barents Sea. The discoveries have a preliminary total estimate of 85 million standard cubic metres of recoverable oil equivalents (Sm3 o.e.). The largest discoveries are 6507/4-2 S (Dvalin Nord) in the Norwegian Sea, 31/2-22 S (Blasto), 25/8-20 S and 25/8-20 B (Prince/King) in the North Sea. Several of the discoveries in the North Sea and the Norwegian Sea are located in areas where they can be developed via existing infrastructure. Here, even small discoveries can contribute to significant value creation.

Gross resource growth and number of wildcats (completed), 1990-2021

Updated: 13.01.2022

Source: Norwegian Petroleum Directorate

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Gross resource growth and number of wildcats (completed), 1990-2021

396 wildcat wells have been completed on the Norwegian shelf between 2010 and 2021, resulting in 190 discoveries. These numbers show a success rate close to 50 per cent, which is high by international standards.

Diversity and competition among exploration companies

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

However, as areas have matured, new and more varied challenges have arisen. This has led to a change in the numbers and types of companies engaged in oil and gas activities on the Norwegian shelf. Generally low entry barriers to exploration on the Norwegian shelf encourage a diversity of companies and promote competition. The reimbursement scheme for exploration costs has been a contributing factor. In addition, high oil prices, exciting exploration areas and good exploration results over the past decade have contributed to further diversity, competition and exploration of the Norwegian continental shelf.

Exploration costs in production licences according to the size, and number of companies, 2000-2021

Source: Norwegian Petroleum Directorate

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Exploration costs in production licences according to the size, and number of companies, 2000-2021
What is the reimbursement scheme for exploration costs?

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

Under this scheme, companies with a loss may choose between an immediate refund of the tax value of exploration costs by the tax authorities, or carrying forward the losses with interest compensation to later years when the company has a taxable profit. When the tax value of exploration costs is required to be paid, the costs will not be deductible from later tax assessments.

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

It can take many years from a discovery is made until it is developed and put in production. Ten to fifteen years is not uncommon. If the companies are not allowed to use the tax deductions during this period, carrying forward losses to later years is financially challenging for the companies. The reimbursement scheme is therefore important for the liquidity of companies not in a tax position.

New exploration companies have been especially prominent in APA rounds (Awards in predefined areas), where blocks in mature areas on the shelf are announced. Exploration in frontier areas, on the other hand, is mainly carried out by the larger companies. The lesser known geology in these areas increase the potential for discoveries, but can also present greater challenges in both the exploration, development and production phases.

Exploration costs are expenses related to seismic data acquisition to map potential petroleum deposits under the seabed and to drilling of exploration wells. In 2021, 40 exploration wells were spudded at a total cost of about NOK 27 billion. In comparison, 31 exploration wells were spudded in 2020, and exploration costs amounted to NOK 22 billion.

Oil price, number of companies on the shelf and spudded exploration wells at year end, 2000-2021

Updated: 13.01.2022

Source: Norwegian Petroleum Directorate

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Oil price, number of companies on the shelf and spudded exploration wells at year end, 2000-2021
Updated: 31.03.2022