North Energy ASA
Issue 07 2012
The latest discovery
North Energy was born from a desire to create an oil and gas company based in northern Norway.
The idea was first raised in 2004 by Harald Karlstrøm, of Origo Kapital, at the Finnmark Conference, proposing it as a means of helping oil companies in the region participate more actively in the production of local resources. Later, the concept received support from Tore Andreassen of investment firm KapNord Fond when he began working together with Harald on realising it as an actual company. A third person, Johan P Barlindhaug of consultancy Barlindhaug, added his own expertise to the project in early 2007, fleshing the proposal out and giving it a national scope.
After the financial guarantees of Origo Kapital, KapNord Fond, AS JPB, Salten Kraftsamband and Alta Kraftlag were gained – and Leif Finsveen from Salten Kraftsamband joined as group managing director – North Energy was formerly established on September 4th 2007. It launched with 150 million NOK in fresh equity capital, giving it the scope to hire necessary personnel. Shares were immediately oversubscribed. North Energy’s vision to support, guide and develop north Norway’s oil and gas assets had gained great popularity. Today it is headquartered in Alta with additional branch offices in Oslo and Tromsø, as well as representation in Stavanger.
North Energy’s role is varied but focuses primarily on the Barents Sea, where the demanding environmental conditions and geology require some of the highest standards in the world. At the same time, it also suffers from far lower key infrastructure than the more active North Sea and Norwegian Sea areas. It does, however, also take interest in prospects found in the mature Norwegian Sea region but sees the development of wells in the Barents Sea, in order to deliver the economic benefits back into north Norway, as its primary goal.
As gas is dominating over oil in the Barents Sea sector, new infrastructure is key to both activity levels and industrial ripple effects along the entire coast from the Lofoten islands in the South to the Russian boarder in the Northeast. This area, which stretches over a distance of more than a 1000km, is believed to include numerous gas accumulations. Today, none of these have the commercial capacity to carry the investment of a 1000km pipeline from own cash flow.
North Energy is one of a limited number of E&P companies that actually explores for gas in the Barents Sea, seeing that a great number of gas prospects would be commercial if the investment in a pipeline is shared between several licences. As such, the company took part in making the largest gas discovery in the Barents Sea since Snøhvit, and is promoting a common pipeline at 25 BCM/year. A pipeline would boost the activity level both on- and offshore, rather than building new LNG trains at marginal profits for each individual field at five BCM/year, keeping gas exploration at a very low level.
If North Energy is able to contribute to the building of gas infrastructure, which would give gas in the north the same value as on the rest of the Norwegian Continental Shelf, it will surely fulfil one of the key objectives of forming the company. An exploration boost followed by numerous new developments would also deliver economic benefits back into north Norway.
North Energy is still building its understanding of drilling own wells, and has participated successfully in every licensing round since the start in 2007. Currently it holds a total of 25 licenses and two operatorships. With eight of those in the Barents Sea, it is the region’s second most active oil company after Statoil.
The process of developing its wells is driven by the desire to create a long-term sustainable oil and gas industry that will not only benefit north Norway directly through the economic value of energy resources, but also indirectly through the communities and societies it will help to generate. At the same time, huge emphasis is placed on the area’s fragile environment by research into increasingly innovative production and utilisation technology.
Since it began, the company has already undertaken important drilling work throughout its three key areas. In 2011, for example, the company made its first moves into PL535 Norvarg, PL530 Heilo and PL518 Zapffe – all in the Barents Sea – with gas proven at Norvarg at an estimated volume of 260 million barrels o.e.. Appraisal wells will be drilled here between April and September 2013. Business for the company since it began has of course been negligible: currently still in the process of developing its assets, North Energy is working at a loss of 471.8 million in 2011 (up from 289.2 million in 2010) as a result of ongoing exploration. The increase in figures reflects the success it has had in winning further licenses and expanding its drilling work.
Looking forward, an intensive drilling programme is underway. The end of 2012 has four wells planned: PL370 Kakelborg oil well in June/July; PL385 Jette gas condensate well between July and November; PL299 Frode oil well in early November/December; and PL498 Skagen oil well in late November/December. The Kakelborg oil prospect, located in the North Sea, was spudded in July 2012 and will be drilled by the Borgland Dolphin. In addition to the Norvarg appraisal well, these will strengthen North Energy’s position and lend conviction to further development in the region.
North Energy believes in technology as a means of gaining the most from its business. Because of this it collaborates closely with a range of academic and engineering bodies to create and bring to reality ideas formed in the field. In early 2012, for example, it announced new partnerships with the University of Tromsø and University of St Petersburg. North Energy will contribute data and first hand experience of the Barents Sea to the project, whilst the two academic institutions will use MSc and PhD students to refine and analyse the information. Together, they will further the geological understanding of the region to the benefit of both drilling and science.
North Energy is also involved with ColdTech, a research initiative aimed at developing technology and industrial assets specifically for the Arctic environment. A consortium consisting of universities, colleges, and the Harstad arm of risk assessment firm Det Norske Veritas leads the way whilst North Energy, through its holding of licenses and operatorship, will contribute data from the field. Brought together, it will create a dynamic hub of knowledge that can be drawn upon in future engineering.
Everything is looking bright for North Energy. It has great business and operational experience backing it, and its ethic of developing north Norway for north Norwegians has gained the support of government officials and financial bodies a like. The Barents Sea is a harsh but relatively untapped area that promises to deliver sustainable resources well into the future. North Energy, as one of its leading developers, will be at the forefront.
North Energy ASA
Services: Exploration and appraisals