Who will discover a major accumulation of hydrocarbons in Greenland - and when?
The latest hunt began in July, when the drillship West Navion spudded a well for Statoil and three partners about 145 kilometers offshore of Greenland's capital, Nuuk. The Qulleq-1, a name derived from the Greenlandic word for "oil lamp," marks the first drilling in the region since the 1970s.
Today, everyone knows Greenland has oil. In the early 1990s, geologists discovered significant and fairly extensive oil seeps onshore near the country's west-central coast. Seismic acquired throughout the past decade shows hydrocarbon indicators and a number of inviting structures.
But the exploration areas are so frontier they make Dodge City look like the middle of Manhattan, and so far no one has caught a glimpse of commercial Greenland production.
Statoil sited its well in 1,150 meters of water off of Greenland's southwest coast. Structures in the area actually were identified by coincidence on a publicly acquired tie-line, according to Martin Soenderholm, senior geologist-petroleum for Greenland's Bureau of Minerals and Petroleum in Nuuk.
"Seismics in the region show huge, rotated fault blocks with DHI=27s - flat spots," he said. "The closures are of Statfjord size, and estimated possible gas reserves in the Fylla region, if there is gas, are in the order of 100 trillion cubic feet.
"AVO analysis of the flat spots has shown that they most probably represent a gas-water/oil contact," he continued, "and Statoil estimates a 50 percent chance of gas discovery in this first well."
Exploration targets weren't disclosed, but may include Cretaceous turbidites overlain by a thick Tertiary mudstone succession. Earlier wells reached Tertiary to mid-Cretaceous zones.
Statoil and Phillips Petroleum hold 38.5 and 38.25 percent, respectively, of the Fylla license. Other exploration partners are Dansk Olie-og Gasproduktion (DONG) and Greenland's state oil company, Nunaoil.
Evaluation of the Qulleq well will determine future drilling plans, according to Aanon Spinnangr, Statoil's country manager-Greenland. Additional exploration "depends on what we find," he said.
"We are really looking forward to getting information about the reservoir."
Drilling in Greenland's waters is hardly dirt cheap, with the budget for the Qulleq-1 in the neighborhood of $25 million.
Spinnangr said that does not include any of the preparation work or drillship construction costs.
What's more, production outlays and distance-to-market may be a problem even with a major discovery. Oil could be produced and loaded with an FPSO-type system, then shipped on tankers to wherever prices are highest, Spinnangr said.
"In the case of gas, it's more of a problem," he said. "Today there might not be a buyer willing to pay what we will need to produce it."
An improved oil and gas market makes Greenland exploration more attractive, but that had nothing to do with timing of the Statoil well. Spinnangr said drilling was originally scheduled for 1999, but delays in completion of the drillship bumped back the spud date to this summer.
With the same group of partners, Statoil has a seismic option in a region north of the Fylla license, where geophysical work for evaluation is under way. Spinnangr thinks offshore North Greenland also looks like a promising exploration sector.
"That's quite an interesting area in terms of resources and geology, but it's for the future," he said - "maybe 15 years or so."
Against All Odds
Greenland seemed like a natural choice for Phillips because of the company's long-standing activity in the North Sea as well as its connections to Denmark, according to Flemming Joergensen, exploration manager-Scandinavian Division for Phillips in Stavanger.
"We have always worked the North Atlantic quite extensively," Joergensen said. "We took a look at Greenland in the early to mid-'90s. At that same time, the Geological Survey of Denmark and Greenland had shot some new seismic."
Discovery of the flat section indicating gas-liquid contact was "clearly the seismic feature that drew the attention" of the industry, Joergensen explained.
"We'd done quite a bit of work on the seismic and thought, 'Well, all right, (the play) is high risk, but it's worth looking at,'" he said.
Joergensen has no illusions about the odds against success with initial drilling.
"The exploration relevant to this area all took place in the mid-1970s," he noted. "There was a group of several companies that drilled five wells, all dry holes, and they left the area quickly after that.
"We look at this as real frontier exploration. It's long-distance correlation with Labrador and onshore Greenland," he continued.
"There's a lot of risk involved. One should take a few of these into your portfolio, because if you are successful, it's a company-maker."
Five Easy Pieces
West Greenland exploration began during a period of rising oil prices in the mid-1970s. Arco, Amoco, Chevron, Mobil, Total and Ultramar led groups that obtained licenses, and 16,000 kilometers of seismic were acquired during the period.
Exploration activities ended in 1978 after five exploratory wells were drilled and declared dry. However, the Geological Survey of Denmark and Greenland (GEUS) re-evaluated the well data in 1997 and found a possible hydrocarbon discovery in one of the wells.
GEUS and the Greenland minerals bureau publish the Greenland Hydrocarbon Exploration Information Service (Ghexis) newsletter with information about many aspects of Greenland's exploration potential. Issues can be found on the Web at: http://www.geus.dk/ghexis/vactcvuceszftwcrq
A group headed by Arco returned in 1984 and received an exploration license in Jameson Land, in East Greenland. This group acquired 1,800 kilometers of seismic but relinquished its license in 1990 without drilling an exploration well.
"One of the big things about Greenland is that we're talking about very, very large areas with sedimentary basins. If you look at the map, Greenland is well covered with seismic," said Flemming Christiansen, head of the GEUS stratigraphic department in Copenhagen.
The seismic grid is coarse in many places, however, and much of the 1990s was devoted to additional geophysical work.
BP, Exxon, Japan National Oil Company, Shell, Statoil and Texaco funded a seismic reconnaissance survey project in northern frontier areas offshore eastern and western Greenland, beginning in 1990. The partners in the Kalaallit Nunaat Marine Seismic (KANUMAS) project continue to hold an exploration preference in the areas covered by the surveys.
In 1992, GEUS found the presence of seeping oil in the Disko-Nuussuaq region of West Greenland.
"We have been able to demonstrate five different oil types," Christiansen said, "and that's been one of the triggering factors for the interest in West Greenland - the oil seeps."
groenArctic Energy Inc. of Calgary received an exclusive onshore exploration license on Nuussuaq and Disko in 1995 with Greenland-based partner Platinova A/S. After conducting an airborne geophysical survey, groenArctic drilled an exploratory well to almost 3,000 meters in southern Nuussuaq.
"In 1994 and '95 they found a lot of oil in core holes in several areas," Christiansen said, "but it was a small company and they ran out of money and gave up in 1997."
GEUS evaluation of previously acquired seismic in 1994 identified large, tilted fault blocks and direct hydrocarbon indicators in the Fylla Banke area. Nunaoil acquired an additional 1,706 kilometers of data and confirmed the seismic flat spots.
In December 1996, the Statoil consortium received an exploration license covering 9,487 square kilometers of the Fylla region. The same group of partners, with Phillips as operator, obtained a license off Sisimiut, about 300 kilometers north of Fylla, in June 1998.
Administration of Greenland's petroleum resources was transferred from the Danish Ministry of Environment and Energy to the Greenland Bureau of Minerals and Petroleum in 1998. Plans call for a new licensing round in 2001 offshore West Greenland between 63 and 68 degrees north latitude.
"There are several huge prospects and leads in that area, and also other types than the tilted fault-blocks of the Fylla area," Soenderholm said. "And the presence of oil seeps onshore Greenland shows that the gas-prone image the Davis Strait and Baffin Bay have suffered from is no longer valid."
Other interesting prospects exist in open-door areas south and north of the licensing-round area, as well as on the Nuussuaq peninsula and in East Greenland, particularly in Jameson Land, he said.
The Bureau is planning a 1,000-2,000 kilometer seismic survey to evaluate the potential of Northwest Greenland, according to Soenderholm. But he said open-water periods there are only 2 to 3 months long, and large icebergs abound in the region.
"Northeast Greenland also has attracted industry interest on the analogy with its Norwegian counterparts," he said. "However, the region is heavily ice-infested and there are many technical and environmental problems that have to be solved before production is realistic.
"A time frame of 15-20 years seems plausible."
The 2001 licensing round covers an area comparable in size to the Viking-Central graben system of the North Sea, penetrated by only five exploratory wells - Qulleq-1 is the sixth - and with just 24,000 kilometers of modern seismic data, he noted.
TGS-Nopec plans to acquire another 4,000 kilometers of spec data in the area.
Soenderholm foresees many years of exploration in Greenland, with vast opportunities for hydrocarbon prospecting.
"Greenland," he said, "is one of the few frontier regions left in the world where there are still large unexplored areas with giant structures and documented prospects."