Northern Sky Research

European Oil & Gas: The Move North

May 16th, 2012 by Brad Grady   More from this Analyst | Profile

As fields mature in the North Sea and warmer winters reduce arctic sea ice, both the Exploration & Production and Distribution segments of the European Oil & Gas industry are heading north.  New discoveries throughout the Norwegian Sea are moving the E&P industry towards the fringe coverage areas of existing FSS Networks, and the Northern Sea Route is virtually untouched by all but Iridium.  In all, how far north and how quickly the sector moves north will have a significant impact on the satellite communications industry.

In NSR’s Oil and Gas via Satellite, 2nd Edition, the move of O&G activity further north was noted as a significant trend within Europe.  This trend helps to increase in-service VSAT and MSS units in the European O&G market to over 37,000 by 2012, up from 19,000 in 2021.  With upwards of 20% of the world’s untapped natural gas, it is easy to see the attraction of traveling to northern regions.

Already, drilling activity for 2012 is poised to outstrip 2011 levels within the northern region.  However, the location of this activity within the region will be a big factor for satellite service providers.  Within the first half of 2012, most new exploration activity continued to remain within the Southern North Sea, perhaps an indicator that economic conditions have pushed off risker exploration activities further north.  In addition, the recent Johan Sverdrup deposit discovered by Statoil last year has further kept the focus on the mature sectors of the North Sea – although oil is not expected to flow until 2018.

In fact, an exploration well within the Barents Sea failed to find commercial quantities of hydrocarbons, and is instead heading back to the North Sea to explore another location.  This follows on the footsteps of investment decision delays at the Gazprom, Statoil and Total owned Shtokman gas project, as extraction costs still remain too high.  In the word’s of Statoil’s CEO, the industry had been, “unable to crack the code” of successful O&G projects in the Barents Sea.

 Bottom Line

All told, the conservative strategies by the O&G industry appear to be focusing efforts on well-established regions in the southern and central North Sea – a good thing for VSAT service providers.  With more near-term focus on these areas, development of higher latitude locations will continue to be delayed (but not erased).  Make no mistake, O&G activity is moving well North of 70 Degrees… but the O&G industry will continue to explore and develop regions within the coverage of FSS networks for the foreseeable future as well.