The good, the bad, the ugly

European Region

American Association of Petroleum Geologists (AAPG)
David R. Cook
David R. Cook

Q: In entering the New Year and in terms of the profession and industry, how would you describe the “state” of the European Region?

A: A strong, integrated and active group of explorationists is still recognized as the most effective way to add value to a company by what is called "organic growth," which is very much a long-term activity. However, reality shows that the policy of hiring young G&G professionals in many companies is at a low level, which as a short-term reaction to the current situation is surprising considering the difficulties the industry faces as a result of previous recruiting downturns.

Representation of G&G experts in higher management positions is at a similarly low level, which may be one of the reasons that exploration budgets have been reduced to the extent that they have, as a short-term response to the recession.

Hence, the "state" of the Industry is very much one of constraining long-term investments in favour of short-term targets, which does not bode well for the middle term health of the industry.

Q: How would you describe exploration throughout your Region over the past year? For example, was it healthy, robust, troubled or promising?

A: Exploration in Europe is declining in the mature oil and gas provinces of the United Kingdom, Norway and the Netherlands. There continues to be a large amount of acquisition and divestment activity in these areas as the majors move out and the smaller independents take hold. Drilling activity in the North Sea remains at a low level and is likely to remain so due to the current cash-constrained nature of the industry as a whole and the smaller players in particular. Exploration in the mature areas could certainly be described as “troubled”.

Main players are focussing their attention on eastern Europe and Greenland, and exploration in these areas could be described as “promising.” It is hoped that further acreage rounds in the North Sea, Norwegian Sea and the Atlantic margin will reactivate exploration in these areas over the next few years.

Q: What are the hottest areas for exploration in your Region, and do you see continued activity there?

A: In western Europe discoveries of significance are only being made on the Norwegian continental shelf. Exploration activity in the North Sea is focused on near field exploration and appraisal, and discoveries tend to be small and economic only due to the proximity of infrastructure. It is anticipated that exploration activity in the UK, Norway and the Netherlands will continue at the current relatively low level for the next few years. Exploration for plays in structurally and stratigraphically deeper levels has not yet been very successful and new concepts are required to make these deeper intervals an interesting target.

While many companies keep focusing their efforts on exploration in conventional resources, a kind of race has developed among super-majors and majors to take a lead in exploring unconventional plays in eastern Europe and in particular Poland , Hungary and Romania. The Black Sea Basin is receiving renewed attention with 3-D surveys being planned for deepwater areas of Romania and Turkey. It is likely that exploration activities will increase in this area over the next few years.

The major international oil companies continue to be interested in the exploration and development of resources in Russia – however, the political situation continues to provide huge uncertainty particularly with respect to resource ownership. Considering the large amount of investment needed to maintain the current position of Russia as a pre-eminent producer, ageing infrastructure together with the vast petroleum potential of the Arctic (~ 100Boe in return for investment of $3-6 trillion) demonstrate that it is in Russia’s national interest is to change its “xenophobic” approach to foreign investments soon.

Q: What might be the hottest exploration areas to watch in 2010?

A: From a conventional point of view the hottest area in western Europe will probably be the Atlantic Margin, stretching over more than 3,000 miles from the Iberian peninsular to northern Norway. In this area relatively few wells have been drilled and there is significant room for the pursuit of new exploration concepts, geological structures and technology.

As mentioned above, the other area to watch is eastern Europe, where exploration for onshore shale gas and tight gas has already begun. Development of these potentially vast accumulations will have to be different from that so successfully being achieved in the United States. In Europe, dense population and strong environmental legislation will preclude drilling of thousands of wells at small spacing. The footprints of such developments will have to be very much smaller, hence it will not be possible to simply copy the American success story and significant technological breakthroughs will be required to recover these resources.

It is anticipated that exploration activity will increase in the Black Sea basin where there is a renewed interest in the deepwater areas.

Q: What are the biggest challenges facing the profession and the industry in the European Region in 2010?

A: Major step changes in technology will be required to mitigate exploration and development risk. For instance, improvements are required in the identification of potentially hydrocarbon-bearing structures in the offshore environment by the use of electromagnetic surveys and the further improvement of 3-D seismic resolution.

In the onshore environment we will need to improve our ability to locate the sweet spots in shale gas plays and reduce the environmental footprint of drilling and development activities.

Critical to the future of the industry is our ability to manage the environmental issues associated with onshore exploration and the development of tight gas, shale gas, shale oil and coal-bed methane resources.

In mature areas a key challenge is to maintain hydrocarbon production, particularly as Europe is becoming more reliant upon hydrocarbons from external sources.

As the industry moves into new geographical and technical arenas, it will be critical to continue the recruitment and training of geoscientists to maintain a work force with the necessary skills and expertise, especially as a large proportion of experienced geoscientists are due to retire over the next few years.

Q: What developments do you anticipate happening in Europe in 2010?

A: The industry recognizes the need for further technological developments in the exploration, evaluation and development of unconventional resources and it is anticipated that many of these will come to fruition in 2010 or shortly thereafter.

Q: What are some of the things that you would like to see happen in 2010 that would directly help both the industry and profession in the European Region?

A: Greater collaboration between the industry professional bodies would reduce duplication of conference and educational themes, which in turn would be appreciated by industry when budgets are tight.

Strengthening the general perception that a strong E&P industry is needed if we want to change our energy palette in the next two to three decades and maintain or improve our current level of economic activity.

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