Production for the long haul

Abstract

FAROEBusinessReport 2008 • 109 Denmark’s rising energy giant DOng energy has long been building a significant presence in the Faroes as part of placing big bets on the northeast atlantic margin. The vast region stretching from irish and Uk through Faroese to norwegian territories comprises large structures that haven’t been drilled yet and there is growing consensus that it’s likely to yield huge discoveries in the years to come. active in the Faroes from the start of offshore exploration here in 2001, and present in the Uk since the same year, DOng energy through its DOng e&P subsidiary is recognized as one of the leaders in the Faroes/West of shetland area, with a 21-percent combined share of total exploration and development licenses. “Our exploration and production activities are focused in two major areas,” senior Vice President Jan Terje edvardsen explained. “These areas are the mature north sea and the atlantic margin. The center of gravity of our e&P business is to produce a substantial part of the DOng energy group’s total gas turnover.” in Tórshavn, Faroe islands, DOng e&P’s representative regin Hammer added: “as part of the atlantic margin, the Faroes is obviously included in our long term strategy to secure oil and gas at the upstream level. and when we engage in an area, we are thorough and persistent.” after decades of effort, understanding atlantic margin reservoir and hydrocarbon characteristics continues to present a viable challenge for the oil and gas industry. However, significant fields such as norway’s Ormen Lange, as well as Foinaven and schiehallion west of shetland, have brought new enthusiasm—as has the recent Lochnagar/rosebank find close to the Faroese area. DOng energy’s strategic interest in the region has become exceedingly evident since its 2005 purchase of a 10.34 percent share in the gigantic Ormen Lange gas field off mid norway. With Ormen Lange on stream since late last year, DOng’s 2 billion usd investment is now returning enviable access to an energy source in high demand. DOng energy’s share of the estimated reserves in the field amounts to a staggering 40 billion cubic meters of gas—that’s roughly the equivalent of Denmark’s total gas consumption for a whole decade. The company is also part owner of gassled, the norwegian gas transport system through which massive streams of gas are channelled to the Uk and other overseas markets. Technical challenges posed by tough weather conditions in the winter and, at times, layers of basalt rock contribute to making drilling costly. However, with a well-informed team of scientists and engineers, DOng energy is able to take advantage of its special knowledge of atlantic margin geology, according to mr edvardsen. “geologically, we’re looking at basins and structures irrespective of geographical borders,” he said. “as far as the Faroes is concerned, we’ve been involved in two wells, one of which had very thick layers of basalt to work through. experiences such as these help us build a unique knowledge base; and as technology has evolved lately, more useful seismic images of sub-basalt sediments are becoming available. The basalt problem isn’t going to go away just like that but it’s becoming less of a block.” DOng’s success rate in exploration wells is remarkable, he noted. “We’ve placed emphasis on becoming basin master, meaning we’re very keen on understanding the geology here—and good at combining data from Denmark, norway, the Uk, Faroes, and greenland, to apply the specialized knowledge and perspectives needed for successful operations. On average, we’ve had a 50-percent exploration success rate, at low cost.” When it comes to production, DOng energy is seen as a top quartile operator. “in fact, we’re one of the top three most effective drillers in the north sea,” mr edvardsen said. The mature north sea is about pursuing a hub driven strategy to maximize value creation from the existing infrastructure, whereas the atlantic margin is viewed in the context of “long-term, larger gas reserves in areas with substantial potential.” another DOng e&P “future potential area” is seen in the company’s commitment to a high risk/high reward greenland venture. Holding 68 licences in greenland, Denmark, norway, Uk, and Faroe, DOng e&P has a strong market position in the north sea and the atlantic margin. The company produces approximately 50,000 barrels of oil equivalents per day, with more than 20 years of production worth of known reservoirs in possession.