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).
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.
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.
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.