Representatives from Chinese oil major CNOOC 中海油 met yesterday with their Jan Mayen license partners, Eykon Energy from Iceland and Petoro, owned by the Norwegian state. Talking to Icelandic TV station Stöð 2, Gunnlaugur Jónsson from Eykon described plans to begin two-dimensional data acquisition by next summer, then three-dimensional measurements two years after that. Drilling platforms could be seen in the area between 2019 and 2021, he added.
Everyone at the meeting was smiling broadly, despite the fact that falling oil prices have been making Arctic oil exploration projects less attractive. Asked about that, Gunnlaugur said he didn’t perceive a diminished enthusiasm.
My blog hosts a long-ish background article about CNOOC and their activities in Iceland. Occasional updates about the Jan Mayen (Drekasvæði) project pop up in it from time to time.
Norway’s state-owned Petoro will take up a 25% stake in an E&P license offshore Iceland, applied for by CNOOC and its local partner, one-year-old Eykon Energy. The blocks are located in the Dreki area, the Icelandic sector of the waters south of the Norwegian island of Jan Mayen. The Norwegians are entitled to a stake in any hydrocarbon exploration projects in the Icelandic sector, a right conferred them by a binational treaty that settled a territorial dispute in 1981. Petoro already has a share of the two Dreki licenses awarded earlier this year.
Participating in the first four-year exploration phase will cost Norway just over $4m, the oil ministry has informed the Storting, that must yet approve the decision to take part in the license.
Oil-drilling activities in the Norwegian Jan Mayen area have been put on hold by the new Conservative government as a concession to minority parties, a decision that could “shatter Iceland’s oil dream”: exploration in the Norwegian sector would have helped ascertain the prospects in the whole Jan Mayen region. While recent estimates have put recoverable reserves at above half a billion BOE (for the Norwegian part), much of the area is covered by a thick layer of basaltic lava, which makes those figures uncertain and adds to the exploration costs. Should one discovery be made, the estimates would rise significantly, with potential consequences for geologically similar areas offshore East Greenland. That could attract some of the oil majors, which so far have shown little interest in the area. The Icelanders would surely welcome an oil boom; the president has even talked about setting up a wealth fund like the Norwegians. CNOOC, rather new to offshore drilling, could find themselves as the largest company with an interest in Jan Mayen.
Also present in the Dreki area are Ithaca Energy and Faroe Petroleum. Korean major KCNA owns 23% of the latter through Dana Petroleum, an asset they had been rumoured to want to get rid of, but which now they seem quite happy to keep.
More about Chinese interest in Icelandic oil in my article on the topic.
Iceland’s National Energy Authority (NEA) is done processing the application for an E&P license in the Dreki Area presented by Chinese state-owned oil giant CNOOC and Eykon Energy, an Icelandic company established last year. The Dreki Area is the Icelandic half of the region that surrounds the Norwegian island of Jan Mayen, and a 1981 treaty gives each country the right to a 25% share in any oil drilling licenses awarded in the other’s sector. The Norwegians did take up a stake in the two licenses awarded so far by Iceland, but it’s less clear if they would do so this time, just after the new government there has suspended exploration plans in the Norwegian sector. Norway has now a month to decide if they want a share. By mid November, CNOOC will then be the biggest oil company with an interest in Icelandic oil. The other two are Ithaca Energy and Faroe Petroleum, 23% of which is (for the time being) owned by Korean major KNOC. I’ve written about this topic in some length.