The North-West Atlantic Margin is the area stretching from the western edge of the Norwegian Sea through the Irish continental margin and the UK waters referred to as ‘West of Shetlands’, all the way to the Faroe Islands, 300 km north-west of Scotland. Although exploration commenced in the 1970s, this vast area has not received much attention from companies exploring for oil, but that is beginning to change, and Faroe Petroleum is at the forefront.
“The area between the Shetland Islands and the Faroes was known as the ‘White Zone’, until resolution of the boundary dispute between Faroe and the UK in 1999. It could be regarded as one of the only true frontier areas left in North-West Europe,” says Graham Stewart, Chief Executive of Aberdeen-based Faroe Petroleum. “After the discovery of Foinaven and Schiehallion in the UK West of Shetlands (WoS) in the 1990s proved the potential of the area, we formed Faroe Petroleum with the specific intention of exploring for hydrocarbons in this challenging but very promising area.”
Established in January 1998, and listed on AIM in June 2003, Faroe Petroleum has rapidly increased its holdings from a mere two licences offshore the Faroe Islands to a focussed exploration portfolio with interests spanning Norway, UK West of Shetlands, and UK southern North Sea, as well as the Faroes. The company acquired its first UK acreage in 2004, moved into Norway in 2006, and now is involved in over 40 licenses, both as operator and partner, working with some of the best and largest oil companies in the world. The company’s resource potential at present, as defined by independent consultants Senergy, stands at 225 MMboe risked, and 1,360 MMboe unrisked.
“When we started Faroe Petroleum with the intention of concentrating on these, at that point, relatively unproductive waters, we felt that they held great potential, despite the fact that by the early 1990s over 100, mainly shallow water wells had been drilled across this huge area without a commercial discovery,” explains Graham. “The reservoir challenges of the multi-billion barrel Clair field, discovered in 1977 by BP, were not resolved until the late ‘90s following an extended well test, using a technology which has since unlocked the potential of many stranded reservoirs - horizontal well drilling.”
The first discovery of note WoS after Clair was BP’s 380 MMbo recoverable Foinaven field, found in 1992 after modern seismic techniques and AVO analysis indicated a high probability of hydrocarbon-filled sandstones. This was followed by the Schiehallion field, also by BP, with 425 MMbo trapped in submarine slope sandstones of Paleocene age. Despite the challenges associated with drilling in these, storm-tossed waters, the potential had finally been revealed.
“Since the discovery of these giant fields, the deep waters have been regarded as the most promising source of the huge oil reserves major oil companies are looking for,” Graham adds. “They led many companies to consider drilling on similar stratigraphic traps rather than the more conventional and less risky structural traps typically targeted in new basins. However, that approach created many disappointments, and since then a new focus on structural traps has been pursued in more recent exploration wells, resulting in a significant increase in material discoveries, including Chevron’s Rosebank and Hess’s Cambo.”
Billion barrel prospects
“Our first area of interest was the Faroe Islands, because acreage was only just becoming available, and I had been involved in preparing the Faroese Islands for their first Licensing Round. Also, I have a particular interest in the islands; both my mother and my wife are Faroese, and I spend as much time there as possible. It’s a wonderful place!”
“We initially formed as a Faroese company in 1998, a year before the dispute between the Faroes and the UK was resolved. We teamed up with Eni and were successful in winning two prime exploration licences in the Faroes. We were off to a flying start.”
Seven wells have now been drilled in the Faroes, yielding mixed results, though a working petroleum system has been proven. The most recent well was Anne Marie, drilled by Eni in 1,000m of water in 2010, which was announced as a discovery, having confirmed significant presence of hydrocarbons, but unfortunately lacking good quality reservoir rock. (For a discussion on the history of exploration in the Faroe Islands, see GEO ExPro Vol. 7, No. 3).
Faroe Petroleum’s main operated interest in Faroese waters is the (so-called) Rannva block on the Wyville-Thomson Ridge, which has been described as the largest undrilled anticline in North West Europe. It is visible on the seabed as a positive feature, extends almost 200 km in a west-north-west to east-south-east direction from Faroese into UK waters, and is over 25km in cross section. Forming the physical boundary between the Rockall Trough and the Faroe-Shetland Channel and probably overlying a deeply buried transfer zone, it has been attracting interest for many years.
The company first obtained acreage over the Ridge in 2005 in the 2nd Faroese Licensing Round, extending this in the 3rd round. It also obtained the adjacent blocks over the border in the 25th UK Round in 2010. The geologists believe they have identified two major billion barrel prospects, with Rannva A, in Faroese waters, estimated to hold 1.5 Bbo (P50) and Rannva B, which straddles the border, having an estimated 1.37 Bbo (P50).
High risk – high reward
“These are ‘high risk – high reward’ projects,” says Graham. “Although the acreage is in relatively shallow waters for this region, less than 500m, the prospects are sub-basalt, and drilling through basalt is expensive. We know the volcanics thin considerably in the vicinity of the Wyville-Thomson Ridge, with a prediction of around 500m over Rannva itself, and we are undertaking further analyses using modern techniques like Marine Magnetotellurics (MMT) to reduce the level of uncertainty before we drill.” MMT measures the natural low-frequency electromagnetic field of the earth, and since basalts are highly resistive, a direct measurement for the true-basalt thickness can be derived. Faroe has successfully used this technique on a previous WoS prospect and are confident that it will deliver a result.
“At the moment we view the key risks to success as hydrocarbon charge and migration, since there is no well control within 45 km. On the plus side, however, gravity data suggests that the Wyville-Thomson Ridge structure maybe an inverted sedimentary basin beneath a basalt cap, and we believe that there is significant potential for up to 6 km of pre-basalt sediments.”
Faroe Petroleum have been involved in four of the seven wells drilled in Faroese waters. “These have involved using lots of new, modern techniques to test different play types, in various water depths. As a result of our sub-basalt experience in the Faroes and WoS, we probably have as much experience as any other company in the applications of new technologies in exploring sub-basalt plays,” says Graham.
It is not only in Faroese waters that Faroe Petroleum has promising acreage. It confirmed its commitment to in the UK West of Shetland by taking interests in eleven licenses in the area. Tornado in the UK sector is one of Faroe’s recent successes, a gas/oil discovery with up to 300 Bcfg, operated by OMV.
About 100 km west of the Shetland Islands in the Foula sub-basin, is the promising Aileen prospect, which explores the Upper Cretaceous turbidite sand play found in the recent Total-operated significant gas discovery, Edradour, about 60 km to the north. Hydrocarbons are thought to have migrated from Upper Jurassic shales, which are the main source rocks for the Foinaven and Schiehallion fields to the west of Aileen and the Clair field to the north-east.
“The Edradour discovery in the same Cretaceous play adds considerable interest to the potential of Aileen. However, we still have a lot of work to do de-risking the prospect before we drill,” says Graham.”
“We are also following Palaeozoic plays in two interesting prospects, Freya and Fulla, on the Rona Ridge, about 50 km north-east of the Shetlands. These are just 20 km north-west and on strike with BP’s huge 5 Bbo (in-place) producing Clair Field, Graham explains. “Mature Jurassic source rock is found to the west of the Rona Ridge and the Devono-Carboniferous Palaeozoic sediments which form the reservoir in Clair were found in the Freya discovery well, drilled by Mobil in 1980, in search for an extension to Clair, in which they were not an equity holder. The well found a 300m oil column and although tests were inconclusive, we believe there is good potential here. Early Clair Field vertical appraisal wells had similar results, until technology advances in horizontal drilling achieved a breakthrough in Clair by intersecting fractures and favourable permeability.”
A similar scenario is expected on the Fulla prospect, just a few kilometres north-east of Freya, where again the trap is a rotated fault block, with dip and fault closure. This is due to be drilled by Faroe, (operator with 50% equity) during 2011 and success here will both de-risk Freya and potentially sufficient resource will be identified to justify a standalone development.
“Overall, these are low risk opportunities, but with gross potential in-place STOIIP of over 250 MMbo,” Graham says. “We believe in having a balanced portfolio, with a range of risk – but even wells drilled on so-called ‘low risk – low reward’ prospects can come up with nice surprises, as we discovered last year with our Marie discovery in mid Norway!”
Testing the limits
Much of the recent interest in the Western Approaches has developed around the successful exploration and exploitation of sub-basalt plays, such as was found in Chevron’s Rosebank discovery, 100 km north-west of the Shetlands. As well as chasing this play in Rannva, Faroe Petroleum is pursuing it in the North Corona area, over 300 km north of the Shetland Islands and the most northerly extremity of UK waters.
A number of prospects have been identified in this area, including Lagavulin, where drilling on the Pilot Whale anticline commenced in late 2010, and is still ongoing at the time of press. These are high risk prospects, because the area is 150 km from the nearest proven well to have penetrated the Upper Jurassic shales, but encouraging geophysical evidence for hydrocarbon charge has been observed. “This well proves our commitment to the area – and our courage!” Graham says. “At 1,569m, the water is the deepest to have been drilled West of Shetlands, and it is also the furthest north. And we are drilling in winter!”
Significant upside potential
“We believe that the Atlantic Margin has such potential that we have built a whole company around it,” he continues. “We have a focussed exploration portfolio and a multi-well exploration and appraisal drilling programme, partially funded by moving into producing fields in the UK and Norwegian North Sea. With our partners we have had four discoveries in a row in the past 18 months, and we expect to report on three Atlantic Margin wells in 2011 alone, with many more planned for the future.
“We are now known as successful frontier explorers. Our key strengths lie in our strong exploration and excellent commercial teams, all of whom have experience of working for successful independents and majors. They are the reason why we have a reputation for excellence in the industry and major oil companies are keen to partner us. We do almost all our own work, both technical and commercial, relying little on outsourcing in our key disciplines, to ensure we build and maintain an outstanding knowledge base. Everyone in the company is a shareholder, crystal clear on our strategy and strongly focused on pushing out the boundaries.”
“It’s very exciting – and very rewarding,” Graham Stewart adds. “Our geoscientists get to identify prospects, work them up, and see them drilled, frequently with good results. What more could you want?”