Ithaca Energy and minor partners Petoro and Kolvetni have handed back their oil and gas exploration permit for a sector of the Icelandic Jan Mayen area after seismic exploration yielded disappointing results. Another license holder, Faroe Petroleum, had already given up already in late ’14. That leaves only one active license, whose operator and majority owner is China’s state-owned CNOOC (中海油), in partnership with local company Eykon and Norway’s Petoro.
CNOOC have been exploring in the area. Their local partner Eykon have talked of plans to continue exploring and shown optimism about the results so far. Eykon have a record of optimism on the probability of finding oil off Iceland, and have at different times aired estimates in the high gazillions. Judging by the consistent lack of interest in Iceland from oil majors, even when oil prices were high, no one in the industry shares that optimism. Except CNOOC of course.
For an older but deeper look into CNOOC and Icelandic oil, there’s always what I wrote back when they bought the license.
Surface exploration began last month in the Dreki area off Iceland, in an area licensed to China’s state owned oil company CNOOC (中海油) together with two minority partners, Norway’s Petoro and local company Eykon Energy. Measurements were conducted on the Oceanic Challenger, that operated from Reyðarfjörður with a crew of 60, and a support vessel. (News I reported in June indicated the operation would be exempt from port fees.) This first stage of exploration was expected to last for around three weeks (at any rate the ship is already in Dunkirk).
Eykon chairman Heiðar Már Guðjónsson says the plan is to conduct exploration drilling in three phases, in 2020, 2022 and 2023. The area is quite expensive to explore, and estimates about possible hydrocarbon reserves tend to be rather speculative due to the presence of a thick layer of basaltic lava that makes ascertaining the presence of any oil at all rather tricky without boring actual holes through it. Heyðar Már and others from Eykon have attracted a lot of attention in the past with estimates in the high gazillions, but hardly anyone else is half that upbeat. No oil majors showed interest in Dreki licenses when they were for grabs, and the holders of one of the three awarded licenses, Faroe Petroleum, actually gave up on it last year. CNOOC, on the other hand, are enthusiastic enough to invest in exploration, while keeping remarkably quiet about it (no information on Icelandic oil has shown up on Chinese media).
Eykon Energy, CNOOC’s local partner for their oil and gas license off Iceland, are being offered access to the Mjóeyri harbour, with a fee exemption during the exploration stages of the project, says the mayor of Fjarðabyggð municipality (Vísir). The announcement came after negotiations between Eykon and the municipality, which haven’t yet resulted in a formal agreement.
Mjóeyri harbour (Mjóeyrarhöfn), on the island’s eastern shore, was built for the Alcoa aluminium plant in nearby Reyðarfjörður.
Here’s more on Iceland oil.
Ithaca Energy, the operator for one of the two offshore oil and gas licenses in the Icelandic Jan Mayen area (Drekasvæðið), are planning to start 2D measurements this year, reports Vísir. Ithaca are thus joining China’s state-owned CNOOC (中海油), the operator of the other license and by far the biggest company with an interest in Icelandic oil, who have similar plans according to an announcement from last year.
CNOOC’s local partner, Eykon Energy, said in January that they’re optimistic about the project and undeterred by low oil prices. Faroe Petroleum, where Korea’s KNOC has a stake, don’t share such optimism and relinquished their own Jan Mayen license in December after preliminary studies yielded disappointing results.
The problem with any potential hydrocarbon reserves in the area is that they mostly lie under a thick layer of basaltic lava. Surface measurements like the ones planned for this year might not be enough to ascertain if there’s any oil worth extracting down there, making it hard to settle down the question without rather costly deepwater drilling. Those were precisely the reasons why the Faroe-led group gave up on the area, and Ithaca’s reported will to spend money on exploration counts as the first sign of optimism not coming from the CNOOC-Eykon partnership themselves (people with Eykon have a long record of enthusiasm about the area’s prospects).
More about Icelandic oil in my longish CNOOC backgrounder and here and there in shorter posts.
Gunnlaugur Jónsson from Eykon, CNOOC’s (中海油) local partner for their license in the Icelandic sector of the Jan Mayen area, tells TV station Stöð 2 that they’re undeterred by falling oil prices. Actually, says Gunnlaugur, the current price level makes the 2d measurements they plan to carry out this year even cheaper. If they find large enough deposits, he adds, they might be able to make a profit with oil as cheap as $60 per barrel (Vísir).
Such optimism about Arctic oil is not terribly common these days. CNOOC’s neighbour offshore Iceland, Faroe petroleum, relinquished their license last December after preliminary studies yielded disappointing results.
Faroe Petroleum, a sixth of which is owned by Korea’s KNOC through subsidiary Dana Petroleum, have handed back the license they had been awarded to explore for oil and gas under the seabed in the Icelandic sector of the Jan Mayen area, Iceland’s energy authority informs.
Íslenskt kolvetni or ARC, Faroe’s minority partner in the license, explain their exit from Icelandic oil exploration by pointing to the disappointing results of preliminary studies, that indicate that neither seismic data acquisition nor any other exploration method short of just drilling will help ascertain whether there is any oil down there. As I said in a background article a year ago, estimates about reserves in the Jan Mayen area are loaded with uncertainty due to the presence of a thick layer of basaltic lava. Ketill Sigurjónsson from consulting firm Askja is calling this a “prophecy that regrettably came true”: it was clear from the beginning that you had to drill through all that basalt to find out if there’s anything worth the trouble under it, and that all that drilling would be rather onerous.
The elephant in the room is of course CNOOC (中海油), the holder of another of the three licenses off Iceland. Their licensed area, that’s just next to the one Faroe have just given up on, would seem to be just as tricky to explore. They seem more upbeat though: last October they met with their Icelandic license partner, Eykon Energy, who told Icelandic TV data acquisition in their patch would start next year. Eykon officials have a record of optimism, to put it mildly, about the area’s potential.
CNOOC’s subsidiary Nexen has inquired about the price of seismic 2D data for Barents sea sectors to be licensed in 2016, says Bloomberg. The data are being sold by the Norwegian Petroleum Directorate.
Norwegian newspaper Dagens Næringsliv already calls this China ‘hunting for Norwegian oil’.
Another CNOOC subsidiary, COSL or China Oilfield Services (中海油服), has been operating rigs in Norway for quite some time. A $150m lawsuit their brought against Statoil, which I wrote about one year ago, was settled last June for less than half that money.
Meanwhile in Iceland, CNOOC’s partner Eykon are saying they might start acquiring seismic data next summer in the sector they own a license for, in the Jan Mayen area.
Last year I wrote a background article on CNOOC in Iceland and elsewhere. By not reading it, you’re missing out on plenty of CNOOC trivia you could enliven dinner parties with this weekend.
It’s not time for Iceland to “bet on oil”, as they seem to be doing after granting three oil licenses for the Drekasvæði (Icelandic Jan Mayen area), where “there are few indications” that production will be profitable, says Árni Finnsson of the Iceland Nature Conservation Association (Náttúruverndarsamtök Íslands) to AFP. Árni’s and other local environmental organisations had shown their opposition to Jan Mayen exploration earlier, for example with a demonstration just after Chinese major CNOOC got the third of the licenses some six weeks ago.
Eykon Energy, CNOOC’s local partner in the Jan Mayen license, would surely differ with Árni’s assessment of the prospects for oil exploration in the area. They’ve been talking about reserves of up to 1bn barrels of oil equivalent, some twenty times what the Norwegian petroleum directorate estimates is to be found down there.
Some rather remarkable estimates about the potential hydrocarbon reserves in the Icelandic Jan Mayen area (Drekasvæði), coming from Eykon Energy, a partner of China’s CNOOC in the largest licensed sector there, have been making the rounds on Norwegian, Icelandic, Danish, Faroese and English-language media.
An area straddling the border between Icelandic and Norwegian waters might contain, according to Eykon chairman Heiðar Már Guðjónsson, reserves of up to 1bn boe. The area, which people with the company have named Bergþóra after a Njáls saga character, doesn’t look particularly close to the sector licensed to Eykon and CNOOC and such numbers would be good news for the neighbouring licensees, among them Ithaca Energy and, through Faroe Petroleum, Korea’s national oil company. Heiðar Már’s numbers for Bergþóra alone are twice as much as what the Norwegian petroleum directorate (NPD) used to estimate for the whole Jan Mayen area.
That’s nothing compared to the 10bn barrels Heyðar Már mentioned to Dagbladet when talking about the whole area, which, converted to money, would be enough to pay off Iceland’s creditors and surely buy a lot of nice things. Some have expressed skepticism about an estimate that’s a healthy 1900% above the NPD’s, but still lags behind the 20bn that Eykon’s own Terje Hagevang projected back in 2008.
I often write about Jan Mayen oil.
Chinese oil major CNOOC has finally got an E&P license (expected already last October) in the Dreki area, the Icelandic sector of the waters south of the Norwegian island of Jan Mayen. CNOOC, through an Icelandic subsidiary, is to be the operator of the license, and to control a 60% share of it. They’re partnering with Norway’s state-owned Petoro AS, with a 25% share, and Eykon Energy, a local company.
I wrote about Dreki oil in some length in September (today’s announcement was ‘imminent’ back then), and more briefly in some recent updates.