OIL giant Total has made a discovery in the North Sea which has generated excitement following the recent slump in the crude price.
The French company made a gas find it described as encouraging around 100 miles east of Aberdeen continuing a run of success that has shown there is still lots to go for in the North Sea.
The find with the Isabella well was the third that Total has made in the North Sea in recent months.
Oil and gas consultancy Wood Mackenzie said Isabella extended a period of ‘exploration triumph’ in the UK for Total.
The company’s success will provide a badly-needed boost for firms in the North Sea amid the market turmoil triggered by the coronavirus and the start of a price war between Russia and Saudi Arabia.
North Sea in focus as fall in crude price gathers pace
Brent crude sold for less than $30 per barrel yesterday, compared with around $52/bbl at the start of the month.
Wood Mackenzie analyst Glen Morrall said Isabella is likely to be put on the backburner at current prices.
However, he noted: “Given the abundance of nearby infrastructure, the discovery could be commercial should we see a pick-up in sentiment.”
Mr Morrall’s comment highlights the appeal for oil and gas firms of exploring in an area in which there has been lots of activity over the years.
This means it may be possible to develop even relatively small finds commercially by connecting them with existing facilities.
Some oil giants have been focusing attention on relatively under-explored areas such as West of Shetland, in the belief there is a better chance of making big finds in them than in well worked basins.
The success Total has enjoyed with its recent exploration activity could encourage firms to look again at mature areas in the North Sea.
Biggest find in more than a decade shows still lots to go for in North Sea
But exploration and development budgets are likely to come under renewed pressure if the crude price fall is sustained.
Drilling activity in the North Sea fell to a record low in response to the fall in the oil price from $115 per barrel in summer 2014 to less than $30/bbl early in 2016.
The price fall was partially reversed after major exporters such as Saudi Arabia and Russia agreed late in 2016 to curb output to support the market.
That arrangement fell apart ten days ago after the two countries disagreed about how to respond to the impact of the coronavirus on demand.
Total has expanded in the North Sea in recent years after deciding the downturn earlier in the decade created opportunities in an area in which there was more oil and gas to be found. The prices of assets and the cost of support services fell during the downturn.
Oil giant hails North Sea advance as it starts production from giant field east of Aberdeen
“The initial results of Isabella are encouraging,” said Kevin McLachlan, Senior Vice President Exploration at Total, yesterday: “This demonstrates that our exploration strategy in the North Sea to explore for value adding prospects nearby to our infrastructure is working.”
In January last year Total made a find billed as the biggest in the UK for a decade with the Glengorm well east of Aberdeen.
Wood Mackenzie said at the time that Glengorm showed there was still life left in mature areas off the UK.
Total made a major gas discovery West of Shetland with the Glendronach well in 2018.
Neptune Energy and Ithaca Energy also have stakes in Isabella. Both have won backing from overseas investors for expansion in the North Sea in recent years.
Private-equity backed Neptune said the initial findings of the Isabella well showed significant promise. The company acquired an interest in Isabella from America’s Apache in 2018.
It acquired a stake in the Glengorm find through the purchase of the North Sea portfolio amassed by Italy’s Edison, for up to $280m, in October.
Israeli oil firm underlines faith in North Sea after $2bn acquisition
Ithaca Energy was acquired by Delek of Israel in 2017. The Aberdeen-based firm bought a $2bn North Sea portfolio from Chevron last year.
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