Exploration activity

In 2019, exploration activity was at the same level as in 2018, and significantly higher than in the previous two years. 57 exploration wells were spudded and 17 discoveries were made on the Norwegian continental shelf. The discoveries have a preliminary total estimate of 72 million standard cubic metres of recoverable oil equivalents. This gives an expected resource growth that is slightly lower than in 2018. Last year, mostly oil was found, while in 2018, it was predominantly gas. The growth in resources is not sufficient to maintain production at a high level after 2025.
In 2019, exploration activity was at the same level as in 2018, and significantly higher than in the previous two years. 57 exploration wells were spudded and 17 discoveries were made on the Norwegian continental shelf. The discoveries have a preliminary total estimate of 72 million standard cubic metres of recoverable oil equivalents. This gives an expected resource growth that is slightly lower than in 2018. Last year, mostly oil was found, while in 2018, it was predominantly gas. The growth in resources is not sufficient to maintain production at a high level after 2025.
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 economic 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 3.9 billion standard cubic metres of recoverable oil equivalents (Sm3 o.e.). This corresponds to around 48 per cent of all the remaining resources on the shelf.

Around 48% of all remaining resources on the shelf are still undiscovered

Undiscovered resources are split as follows between the different sea areas: 18% in the North Sea, 18% in the Norwegian Sea and 64% in the Barents Sea.

Undiscovered resources by 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 2018
Source: Norwegian Petroleum Directorate

Resource growth per 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 big jumps 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 shelf includes sea areas that have been explored to varying degrees.

Accumulated resources on the Norwegian continental shelf, 1966-2019

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Source: The Norwegian Petroleum Directorate

Accumulated resources on the Norwegian continental shelf, 1966-2019
Source: The Norwegian Petroleum Directorate

A total of 1140 wildcat wells have been drilled on the Norwegian shelf at year-end 2019. In the North Sea, more than 750 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 and 1983). 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 only moderate resource growth in the North Sea.

In the Norwegian Sea, exploration activity started in 1980, and about 260 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 is 6406/3-8 Maria in 2010.

In the Barents Sea, exploration activity also started in 1980, but the area has considerably fewer wildcat wells (about 130) 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, but there is still a relatively steep growth in major resources here in recent years, compared with the other two sea areas. 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 57 exploration wells were spudded on the Norwegian continental shelf in 2019. Many more wells were drilled in the North Sea (37) than in 2018, while the number was stable in the Norwegian Sea (15). Slightly fewer wells were drilled in the Barents Sea (5). According to the companies’ plans, a slight decrease in the number of exploration wells is expected for 2020.

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 57 exploration wells spudded in 2019, 43 were wildcat wells and 14 were appraisal wells. A significant preponderance of wildcat wells is also expected for 2020. This is a change from 2018, when approximately as many appraisal wells as wildcat wells were drilled.

Exploration wells spudded on the Norwegian continental shelf, 1970-2019

Source: Norwegian Petroleum Directorate

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Exploration wells spudded on the Norwegian continental shelf, 1970-2019

In 2019, 17 new discoveries were made, ten of them in the North Sea, six in the Norwegian Sea, and one in the Barents Sea. The discoveries have a preliminary total estimate of 72 million standard cubic metres of recoverable oil equivalents (Sm3 o.e.). The largest discovery is 25/2-21 (Liatårnet) in the North Sea. The discovery will be appraised by the drilling of a well in 2020. The largest discoveries in the Norwegian Sea and Barents Sea are 6507/2-5 (Ørn) and 7324/6-1 (Sputnik), respectively. 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), 1990-2019

Source: Norwegian Petroleum Directorate

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Gross resource growth and number of wildcats (completed), 1990-2019

About 330 wildcat wells have been completed on the Norwegian shelf between 2010 and 2019, resulting in about 160 discoveries. These numbers show that the success rate per wildcat well is almost 50%, 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 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, 2000-2019

Source: Norwegian Petroleum Directorate

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Exploration costs in production licences according to the size, and number of companies, 2000-2019
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 (Awards in predefined areas), 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 2019, 57 exploration wells were spudded at a total cost of about NOK 23 billion. In comparison, 53 exploration wells were spudded in 2018, and exploration costs amounted to NOK 25 billion.

Oil price, number of companies on the shelf and spudded exploration wells at year end, 2000-2019

Source: Norwegian Petroleum Directorate

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Oil price, number of companies on the shelf and spudded exploration wells at year end, 2000-2019
Updated: 06.04.2020