Just before everyone shut off their computers for a well-deserved Christmas break less than two weeks ago, CNOOC announced that the most recent appraisal well on the Glengorm discovery had been unsuccessful. It is a clear example of the major risks associated with appraisal drilling.
Glengorm is not the only appraisal campaign that put an initial promising discovery in a different light last year. Do you remember Iving, the results of which probably triggered Mol to exit Norway? Further north, the Black Vulture appraisal well turned out dry in the Norwegian Sea and Aker BP’s drilling at Liatårnet has yet to prove the commerciality of the 600-800 MMboe that was suggested to be in place. Last but not least, the Jerv well drilled by Harbour is probably the most remarkable appraisal campaign of the year 2021. More about all this below.
Glengorm
The news that the Glengorm appraisal well (22/21c-14) had in the words of the operator CNOOC, “yielded no commercial hydrocarbons” represents a major disappointment, not only for the Glengorm partners Total and Energean, but also possibly for wider UKCS E&A activity.
After the very positive take on the discovery well, particularly by Total, there was much anticipation around the two-well programme to be drilled in 2020/2021. That the first appraisal well (22/26d-3) was unsuccessful could be taken on the chin. It was after all, an exploration well testing a separate closure nearby. However, the impact of the second well result announced on the day before Christmas is of greater significance as it was most likely drilled in the same closure as the 22/21c-13 discovery well. So, with 22/21c-14 being non-commercial, it places an upper limit on the resource potential of the Glengorm project.
Clearly, the partnership may learn much from this well that may positively impact further appraisal. It may be too early to write Glengorm off, with possibly the resource base of the discovery well alone being able to support a viable project. After all, Wood Mackenzie carried 250 MMboe of recoverable resources prior to the two appraisal wells. But still, given the number of wells now drilled on Glengorm already – with two failed attempts by previous operators – the costs sunk into this prospect must be astounding.
Iving
The example of an unsuccessful appraisal campaign in Norwegian waters last year is Mol’s Iving project. Whilst the initial discovery well looked promising, with the Triassic Iving prospect alone thought to contain up to 70 MMboe recoverable, the two back-to-back appraisal wells subsequently drilled must have disappointed to such an extent that it may have pushed management over the line to exit Norway soon after.
The main geological explanation thought to be behind the Iving failure is the Triassic reservoirs being more compartmentalised than initially thought, together with poor flow characteristics. This is not entirely new to the Triassic, which is known for its surprises in terms of reservoir behaviour. It is therefore intriguing as to why Mol decided to drill two appraisal wells rather than limit spending and initially drill one.
Black Vulture
In the Norwegian Sea, Equinor last year completed an appraisal well (6507/3-14) on the Black Vulture discovery. Initially thought to contain between 2.5 and 27.7 MMboe after drilling discovery well 6507/3-13, it can be easily understood why appraisal drilling was required to narrow down the volume range. Even though the appraisal well was located in close proximity of the discovery well, it still proved dry. It is probably testament to the Cretaceous (post-rift) traps being of a subtle and thin bedded nature such that closures are difficult to map and delineate.
In this light, it will be interesting to see what the appraisal campaign on the Egyptian Vulture discovery brings. Also reservoired in Cretaceous sandstones, the discovery probably shares many characteristics with Black Vulture – hence the same type of name? The discovery well (6407/1-9) on Egyptian Vulture was a success, with a recoverable volume range of 19-63 MMboe, but the areal extent is large, meaning that the reservoirs may be thin. This also explains why the estimated recovery factors are low – around 15%.
Liatårnet
Aker BP has now completed three recent appraisal wells on the Liatårnet discovery in the Frigg area. Whilst one of the first two wells (25/2-20 & 21) retrieved a core that according to the operator was dripping with oil, the second well (25/2-22S) completed last year failed to prove moveable hydrocarbons.
Liatårnet is a special case, as the oil is hosted in the shallow Miocene Skade Formation at a depth of around 1000 m. Another intriguing aspect about Liatårnet is the observation that a valid closure doesn’t exist, with the Skade sands continuing in an updip direction towards the west. For that reason, the team at Aker BP suggested that a cemented sandstone found just above the oil leg plays a role at sealing the accumulation.
The results of the most recent appraisal well, in combination with the knowledge that earlier attempts to bring oil to surface in 1986 also failed, will no doubt require some further work to justify drilling more wells in this shallow discovery.
Jerv
The last “appraisal” campaign of 2021 that deserves a place in this article is the Jerv well (15/12-25) drilled by Harbour – then Chrysaor – at the start of the year. The reason to include Jerv in here – even though it was carried as an exploration well by the NPD – is the fact that the surface location of the well lined up very nicely with the Fleming condensate field in the UK sector.
With the target of Jerv being the same as the Fleming field reservoir – which is operated by Harbour by the way – there was a high probability of 15/12-25 to test a pressure depleted Paleocene reservoir. This was pointed out at the time by Niels Arveschoug from North Sea Natural Resources, who worked the area in the 1990’s.
And indeed, as predicted, the Jerv well came in as a heavily pressure depleted Maureen reservoir, which demonstrated the appraisal nature of the exercise rather than an exploration attempt. However, given the maturity of the field on the UK side of the median line, it can be stated that it was rather a late-life appraisal exercise.
Appraisal campaigns are the new frontier
Based on the examples discussed here, it is obvious that demonstrating the commerciality of an initially proven column comes with challenges. Even those discoveries that are initially hailed a game-changing in terms of volumes, such as Glengorm and Glendronnach, do not always live up to expectations. Is it a surprise to see this happening? Probably not, and there may be two reasons for this.
First of all, with an increasing number of players being smaller than the Majors, but at the same time heavily dependent on either share price impact and short lead-times to a development, drilling a wildcat well is a big thing. Announcing a positive exploration result, even when subsequent appraisal may not proof the concept, can be attractive for short-term share prices and confidence in the company’s sub-surface expertise. Hurricane’s West of Shetland adventure is a good example.
Secondly, it is a fact that remaining prospects across the NW European Continental Shelf are getting smaller and more complex. It is this complexity that increases the risk of a volume to be revised downwards, which is what probably happened to Glengorm and also to Black Vulture.
At the same time, when volumes are of such an extent that an elaborate appraisal programme cannot be financially justified, there is also an increased risk of volume revisions once a field is taken into production. In that light, it is interesting to see that based on an analysis of 40 fields that started production on the Norwegian Continental Shelf since 2010, Anders Wittemann from Wittemann E&P Consulting (WEPC) last year concluded that it is predominantly smaller fields that appear on the list of fields that produce (much) less than foreseen at project sanction.
So, in summary, there may be both geological and corporate factors at play that increasingly put the spotlight on the outcomes of appraisal campaigns rather than exploration well results. In that sense, it could even be argued that in this day and age of near-field exploration, appraisal drilling is the new frontier.
HENK KOMBRINK
