by Adam Taylor
“I think that China together with other nations is taking a huge interest in the Arctic area in general and specifically in Greenland, and we have seen quite a number of visitors from China over the last couple of years,” Prime Minister Kuupik Kleist said this week. “We don’t really have that much co-operation for the time being, but I know that Chinese companies are showing an interest in Greenland.”
“Greenland is also showing an interest in China: my minister for minerals (and industry) and labor is going to China today on an official visit. I would see a future co-operation as a very positive one and we welcome the Chinese interest,” he continued.
There’s a few reasons why this is interesting:
- We are already seeing a huge grab for land in the Arctic. The reason? It’s believed that there might be a huge amount of untapped natural oil and gas reserves under the surface.
- The key players so far have been Russia and Canada — both countries that actually border the Arctic region. Russia’s push has been particularly notable, with talks of even building an “Arctic city” to house scientists and workers in the region.
- Greenland gained self-rule from Denmark in 2009. Since then the country (population 56,534) has been trying to work out a new, more independent economic system. However, Denmark still controls Greenland’s foreign policy.
- It is thought that 10 percent of the world’s unproven oil reserves and 30 percent of its gas reserves might exist under the rapidly shrinking Greenland ice sheet.
- The Danish Ambassador to the United States Peter Taksoe-Jensen recently gave a talk at Dartmouth that showed Denmark would allow Greenland a lot of leway in making decisions (Foreign Affairs has a good summary of that here).
- China, unlike other key world powers in the debate, has no real claim to land in the Arctic circle. However, it has already performed a number of probes into the Arctic area, which are speculated to be because of interest in a new shipping route once ice melts in the area.
- A Chinese tycoon has already announced somewhat mysterious plans for a “hotel and golf course” on an island off the coast of Iceland. This island, of course, also has a unique strategic position.
We hadn’t really considered Russia a true player in the great Arctic land grab before — but maybe that needs reconsidering.
- Cairn Uses Centek Itsfu in Greenland Offshore Operations (mb50.wordpress.com)
- Commercial exploitation of Greenland and the Arctic region… Denmark says, “We are not nervous” (gcaptain.com)
- Cairn draws a blank at second Arctic well (guardian.co.uk)
Cairn Energy PLC, the Edinburgh-based oil and gas exploration and production company, has successfully deployed Centek’s Itsfu Auto Fill Sub in drilling operations in its 2011 Greenland Drilling campaign. The Itsfu provides controlled drill string filling in one third of the time of alternative methods and prevents uncontrolled, hazardous spillage of well drilling fluids onto the rig floor.
“After learning how the Itsfu works, we are now able to fill 10 stands of 5 7/8″ TT585 connection string in around three minutes,” said John Boyle, Drilling Manager, with Cairn Energy. “This saves both time and ensures the immediate area of the rotary table remains clean compared with conventional filling practices.”
Around every 1,000 feet of running in, the drill string must be filled with fluid to equalize the pressure inside and outside the pipe to avoid it collapsing and to balance the well. The filling process interrupts running in, so speed is very important.
Every 10 stands the Itsfu is made up to the drillpipe by means of the integral swivel and the charge pump is started. The gooseneck outlet is automatically closed by a plastic disc to prevent air entering, and the closed-system drillpipe can now be filled in around one third the time of conventional methods. Once the drill pipe is full, the plastic disc comes free, discharging fluid from the gooseneck as a tell-tale. The mud pump is switched off, and with no pressure or air present, the Itsful fill-up tool can be readily removed by hand from the drillstring, without fluid spurting, and hoisted back to its storage area.
“The Itsfu offers real savings of time as it minimises spillages and cleaning up,” said Cliff Berry, Sales and Marketing Manager at Centek Limited. “Also because it screws into the drill pipe at the rotary table rather than by disconnecting the top-drive, the next pipe stand can be made ready while drill string filling is in progress.”
The Itsfu is drill-team friendly and as simple to install as a circulating sub. In addition, as the top drive is not involved in filling, there is no danger of damaging the top drive saver sub threads and the top drive is also available if needed in the open hole.
The Itsfu is available to drilling teams now and can be rented on a daily basis.
- Cairn draws a blank at second Arctic well (guardian.co.uk)
- Cairn Energy setback in Greenland (bbc.co.uk)
- Cairn Energy stays optimistic with Arctic drilling (cbc.ca)
When the Leiv Eiriksson, a rig built to hunt for oil beneath 10,000 feet of water in the world’s roughest seas, finishes drilling a well off Greenland’s west coast next month, it will sail for its next job — a prospect 9,000 miles away, south of the Falkland Islands.
The month long voyage from top to bottom of the Atlantic Ocean, at a cost of about $500,000 a day, exemplifies how the world’s drillers have never spent so much searching for oil and gas in so many places, spurred by crude prices above $100 a barrel and depleting reserves at existing fields.
After holding back in the aftermath of the financial crisis, Exxon Mobil Corp. , Royal Dutch Shell Plc and other producers will increase exploration spending by the most since 2007 this year to a record $70 billion, said Wood Mackenzie Consultants Ltd. That’s bringing rigs to countries with no history of oil and gas production, from French Guiana in South America to Kenya in east Africa.
“The race for exploration has become hotter than ever,” said Michael O’Dwyer, managing director for oil and gas at Morgan Stanley & Co. in London. “The biggest change I’ve seen in the activities of oil companies over the last 24 months is the focus on exploration.”
About three-quarters of exploration money for conventional oil and gas is spent offshore, where 284 wells will be drilled next year, 30 percent more than in 2011, targeting more than 100 billion barrels of potential reserves, according to Morgan Stanley.
BP and Total SA are increasing exploration budgets after the world’s largest oil companies were beaten to the biggest discoveries by smaller competitors in recent years, such as Tullow Oil Plc’s Jubilee field in Ghana, which is now umping 120,000 barrels a day.
“Majors have overlooked a number of the biggest basins in the world,” BP Chief Executive Officer Bob Dudley said at a press conference yesterday.
U.S. independent Anadarko Petroleum Corp. has found fields off Mozambique in east Africa that hold more gas than the U.K.’s total remaining reserves. Rockhopper Exploration Plc’s Sea Lion discovery is the Falkland Islands’ first commercial find and may contain as much as 1.4 billion barrels of oil.
“We’re seeing some courageous exploration activity at the moment, particularly with the medium-sized companies such as in Greenland and east and west Africa,” said John Martin, managing director for global energy at Standard Chartered Plc in London.
The so-called supermajors have responded in two ways. First, by becoming partners with smaller companies and secondly, by drilling more exploration wells themselves.
When Tullow’s Zaedyus well made a potential find of 700 million barrels of oil in deep water off French Guiana last month, its partners were Shell and Total, Europe’s largest and third-largest oil companies. Paris-based Total is looking to replicate Anadarko’s east Africa success in Kenya, where it’s acquired control of five deepwater exploration blocks.
At BP, the experience of drilling a well in the Gulf of Mexico that exploded and caused the U.S.’s worst oil spill hasn’t deterred it from exploration. The company plans to double spending on exploration from $2.7 billion in 2010. The company plans drilling in waters off Australia, China and the U.K., and will increase its exploration wells to as many as 25 a year by 2013 from six wells drilled this year.
“It’s very hard to grow and make a profit with an oil and gas company unless you are good at, and are investing in, exploration,” Helge Lund, chief executive officer of Statoil ASA , Norway’s largest oil company, said in an interview. “It seems that compared to what we saw in the 90s, oil and gas companies are exploring much more now.”
Exxon CEO Rex Tillerson, whose company spent $3 billion on exploration last year, signed an agreement with Russia’s biggest oil company, OAO Rosneft, this year to spend an initial $3.2 billion exploring undrilled areas of Russia’s Arctic Ocean and the Black Sea.
“As long as oil prices stay above $80, no one’s going to slow their exploration programs,” said Jason Gammel, an analyst at Macquarie Capital Europe Ltd. in London. “Exploration is very high risk, but the highest rates of return on capital tend to be from fields you discover yourself. Unlocking new frontiers can bear fruit.”
The 11 percent drop in prices in the past six months isn’t likely to deter exploration, Wood Mackenzie analyst Andrew Latham said. Brent oil, a benchmark price for two-thirds of the world’s crude, is about $110 a barrel, more than 30 percent higher than its five-year average. Futures contracts show prices above $100 for the next two years.
“The recent softening in oil prices doesn’t change exploration planning,” Latham said. “Most of the industry is planning on prices ranging from $70 to $80.”
Wood Mackenzie’s figures for exploration spending don’t include investment in so-called unconventional oil and gas, which is extracted from oil sands or by grinding underground rocks.
Still, many wells will find nothing more than sand or water. Edinburgh-based Cairn Energy Plc’s $1 billion drilling campaign in the Arctic waters off Greenland has yet to make a significant discovery. While the success rate for exploration wells worldwide is about 48 percent this year, typically only one in four exploration wells will find oil or gas, according to Morgan Stanley.
That’s a factor that may also play to the balance sheet strength of the largest oil companies as worsening financial conditions make funding harder to find for smaller explorers. An index of oil and gas companies on London’s junior AIM market — a leading source of equity finance for smaller drillers — has dropped 39 percent this year.
“The big question is whether financial market turmoil will put pressure on spending,” said Lucy Haskins, an equity analyst at Barclays Plc in London. “Most of the big-cap companies are very keen not to get into a stop-go investment cycle that has dogged their production in past, but some of smaller players may be a more cautious short term.”
By Brian Swint (Bloomberg)
- Offshore Vessel Operators Suffer As Gulf Oil Output Sags (mb50.wordpress.com)
- Bowleven Announces Drilling Success, Offshore Cameroon (mb50.wordpress.com)
- Lundin Petroleum Spuds Exploration Well Offshore Congo (mb50.wordpress.com)
- Tullow Strikes Oil at Enyenra Well, Offshore Ghana (mb50.wordpress.com)
- New Oil Finds Around the Globe: Will the U.S. Capitalize on Its Oil Resources? (mb50.wordpress.com)
The environmental group said Friday activists used speedboats to intercept and climb aboard the Leiv Eiriksson as it left Istanbul. The group said activists had unfurled a banner reading: “Stop Arctic destruction.”
Greenpeace said activists were prepared to occupy the rig for days. It said the oil rig, operated by Cairn Energy, has “a very short window in which to drill their four new exploratory wells” due to extreme weather conditions in the Arctic.