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North America's Source for Oil and Gas News
July 2003

Vol. 8, No. 28 Week of July 13, 2003

Chasing Arctic breakthrough

Greenland touts North Sea-size potential in preparing licensing round

Gary Park

Petroleum News Calgary Correspondent

Greenland, with reserves estimated to be comparable in size to those of the entire North Sea and seeking an economic alternative to its fishery, is trying again to push itself into the forefront of the Arctic hunt for oil.

Along with Denmark, under which it has limited home rule, Greenland said June 30 that its Bureau of Minerals and Petroleum will open a licensing round in 2004, offering an area offshore West Greenland between 62 and 69 degrees North longitude.

The process will start with an open letter of invitation, followed by a meeting in Copenhagen on April 1, 2004, and another in Houston.

The deadline for applications will be Oct. 1, 2004 and the bureau expects to grant licenses either next year or 2005.

The licenses areas include parts of Lady Franklin Basin, Kangaamiut Basin and Ridge, parts of Ikermiut Fault Zone/Sisimut and parts of the Atamnik and Fylla structural complexes.

Terms of the 10-year licenses will be based on existing license terms — awarded to Norway’s Statoil and Phillips Petroleum in 1999 and Canadian independent EnCana last year. EnCana is bolstered by last year’s success as lead operator in the huge United Kingdom North Sea Buzzard discovery off Aberdeen.

They include a corporate tax of 30 percent, a surplus royalty scheme and a carry of 12.5 percent for national oil company, Nunaoil, in any exploration phase.

Offshore exploration began in the '70s

Explorers started dabbling in offshore Greenland in the 1970s and have since drilled seven wells, without finding enough oil to embark on commercial development. Traces of hydrocarbons were found in only two wells.

GronArctic, a small, now-defunct Canadian producer, unsuccessfully drilled an 8,200-foot wildcat well in 1996 on the rugged west coast of Nuusuaq Peninsula before returning its licenses covering 820,000 acres to the Danish government in spring 1998.

Statoil and Phillips have also returned their licenses after fruitless exploration efforts.

The bureau’s 2002 licensing round also proved to be disappointing to the bureau, when EnCana was the only bidder, despite expressions of interest from Shell, TotalFinaElf and Conoco.

Nunaoil President Arne Rosenkrands Larsen said at the time that the poor turnout was “a surprise because we know a large number of companies are engaged in looking at data offshore Greenland. But I think there will be more longer-lasting interest in the future.”

“The acreage on offer has hardly been pricked when you look at the size of it,” said bureau head Hans Schonwandt. “And the technology has taken giant leaps since the drilling campaign in the 1970s.”

Statoil, which has been an active player in the region, said Greenland did not fit into its current portfolio of specific core areas.

Seismic permits awarded last year

One of the most hopeful signs was last year’s award of three five-year permits for seismic studies — one off the west coast to Nunaoil and two onshore permits to Cambridge Arctic Shelf Program.

Based partly on the many dry holes drilled in the North Sea before the big discovery breakthroughs, the bureau is emphatic that it sits on the doorstep of a world-class sedimentary basin sprawling over more than 100,000 square miles.

Having drawn up a revised licensing policy in 1999 to stimulate exploration by re-establishing an open-door procedure for licensing, the bureau has insisted Greenland is “one of the few frontier areas with a potential for giant oil and gas fields.”

The U.S. Geological Survey has also said the regional geology points to significant hydrocarbon accumulations.

The bureau is optimistic that the Fylla area is comparable to Norway’s Ekofisk field, which has been producing since 1971 and is projected to have an ultimate recovery of 3.5 billion barrels.

It also said in a report that areas indicating natural gas in the subsurface have been identified in several large geological structures in Fylla.

In addition, there have been proven seepages of oil onshore in Nuusuaq, about 360 miles north of Nuuk.

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