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Iceland joins Arctic exploration plays
Gary Park For Petroleum News
Iceland has joined the oil and natural gas exploration plays in the Arctic region by issuing licenses covering about 12,500 square miles off its northeastern coast.
The island country’s National Energy Authority granted the formal permits to consortiums led by the United Kingdom’s Faroe Petroleum and Valiant Petroleum, which follow provisional licenses awarded in December for the offshore Dreki Area.
Both consortiums include 25 percent stakes for Norway’s state-owned Petoro.
One license was granted to Faroe 67.5 percent, Petoro 25 percent and Iceland Petroleum 7.5 percent, while the other went to a partnership of Valiant 56.25 percent, Iceland Petroleum 18.75 percent and Petoro 25 percent.
The Iceland energy agency, known as Orkustofnun said the licenses were in accordance with a 1981 agreement between Norway and Iceland.
An initial licensing round was scuttled in 2009 when four companies pulled out. The second round was launched in October 2012.
Water depths 2,600-6,600 feet The blocks on offer sit in water depths of 2,600 to 6,600 feet and are part of what Petoro describes as a “micro-continent” containing the Norwegian island of Jan Mayen and located between the Norwegian and Greenland continental shelves.
Petoro said seabed samples from the area have pointed to the presence of sedimentary rocks and an active hydrocarbon system.
Norway’s Oil Minister Ola Borten Moe said the region could contain “substantial assets,” while Faroe Chief Executive Officer Graham Stewart said the Jan Mayen Ridge license has “significant hydrocarbon potential.”
Icelandic Foreign Minister Ossur Skarphedinsson was reported last year as saying his country expects commercial discoveries to be made in three separate areas by 2025.
Petoro Chief Executive Officer Kjell Pedersen said he was confident the industry can handle challenges such as the remote location and large transportation distances if commercial quantities of petroleum are discovered.
Petoro’s Iceland head Jan Rosnes said the next step involves an agreement among the partners on a budget to fulfill the work commitments, starting with seismic- and other information-gathering work over the next few years.
Orkustofnun said it has ensured the parent companies of the license holders have “sufficient financial strength to conduct the activities for the long-term and can handle corresponding environmental and safety elements.”
Analogous to Norway The U.S. Geological Survey has estimated that the Arctic region contains about 13 percent of the world’s undiscovered crude and about 33 percent of its undiscovered natural gas.
Although United Kingdom-based Cairn Energy drew a blank from a US$600 million, five-well exploration program offshore Greenland in 2011, it has said its interest in the region is undiminished.
Leilla Reddy, with the British investment bank of Panmure Gordon, said the Icelandic government views its waters as geologically analogous to Norway’s offshore.
She said the play is high risk and high reward, similar to East Africa which has emerged as a “hot spot” in only five years.
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