Greenland Maritime Boundary / Oil and Gas Licenses 2012 Update

Greenland Maritime Boundary Active License Map

Since my previous post in Dec, of 2011, Greenland Exclusive Economic Zone / Oil and Gas Licenses, not much has been seen in terms of eventful exploration results.  In spite of this, Greenland is in continuance with it’s plans to open up Greenland Sea licensing blocks to applications.

Greenland Sea Licensing Rounds – 2012/2013

  • Pre-qualification Round – Paying KANUMAS Group members (see below) will have the opportunity to apply for 11 special licensing blocks (view pre-qualification blocks on above map) ahead of non-members.  Applications for pre-qualification as operators were due in March, of 2012.  Those for exploration and exploitation are due in Dec, of 2012.
  • Regular Round – Regular applications for the 8 remaining blocks, along with those not acquired in the pre-qualification round, will open in June, of 2013.  Applications for pre-qualification as operators will be due in July, of 2013.  Those for exploration and exploitation will be due in Oct, of 2013.

KANUMAS members were among those that partook in preliminary seismic studies for the regions of northwestern and northeastern Greenland starting in late 1989.  Members included Exxon, Statoil, BP, Japan National Oil Corporation (JNOC), Texaco, Shell, and NUNAOIL A/S (Greenland’s state oil company).  Project members were granted preferential position in any future licensing rounds comprising the northeastern region of Greenland.  Today, paying members include ExxonMobil, Statoil, BP, Japan Oil, Gas and Metals National Corporation (JOGMEC), Chevron, Shell, and NUNAOIL A/S.

Exploration Progress and Results

  • NUNAOIL – Greenland’s state oil company, NUNAOIL, currently holds a 12.5% minority stake in all but one of Greenland’s offshore hydrocarbon license operations.  NUNAOIL holds an 8% minority stake in the southern Salliit license block.
  • Cairn – Cairn has since completed it’s first phase of exploration for offshore Greenland.  8 exploration wells, seismic surveys, and other data were collected in 2011/2012.  As of yet, only indications of oil seeps have been discovered in both western (Pitu) and southern Greenland license blocks.  Despite $1.2 billion in losses from 2011 Greenland operations, chairman Sir Bill Gammell seems poised to press onward.  Shareholders voted down Gammell’s share options package valued at £2.5 million as a result.
  • Statoil – Since having received a 30% farm-out stake in Cairn’s Pitu license block in Jan, of 2012, (read Cairn spreads out the risk – Farms out shares to Statoil) seismic studies have been completed.
  • Korean KORES – Sept, 10, 2012 – Although unrelated to offshore hydrocarbons, State Korean company has been looking at joint mineral operation opportunities in Greenland.

Sources

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Cairn spreads out the risk – Farms out shares to Statoil

Cairn Energy plc, now operating in Greenland, is a global oil and gas exploration company with headquarters in Edinburgh (United Kingdom).  As far as Greenland is concerned, Cairn Energy holds 11 exploration licenses, including Salliit, Uummannarsuaq, Saqqamiut, Kingittoq, Lady Franklin, Atammik, Eqqua, Sigguk, Ingoraq, Napariaq, and Pitu as an operator.  (Cairn Energy, Summary of Interest)

Cairn Energy sells some of it’s stake in Pitu

On the 23rd of January, 2012, Cair Energy managed to farm out a 30% stake in the Pitu license block to the Norwegian state-owned Statoil company.  (Read BBC article here)  Cairn has thus far managed to hold very high controlling positions in all 11 of it’s licensing blocks.  Greenland’s state-owned oil and gas company Nunaoil, on the other hand seems to have made it policy to keep a minimum of a 12.5 percent interest in all offshore exploration efforts (with the exception of 4 southern blocks that are held to the tune of only 8 percent each).

As Cairn has so far failed to have made any substantial discoveries, it has for quite some time seemed interested in shaking off at least some of it’s risk.  The firm is simply less diversified than some of it’s rival companies, and it does have a lot of it’s eggs in one basket (Greenland).  Looking at the map above, one can see that Statoil, Shell, GDF Suez and Maersk all have interests in the vicinity.  It is easy to see how economies of scale could spill over from operations in any of these 4 surrounding blocks into the Pitu region given new ownership.  Given that Statoil has the status of Arctic exploration champion and is awash with cash, it is abundantly clear that the deal was a positive one for Greenland.

The price of the 30% share in Pitu has not yet been disclosed by Cairn.  It did however note that it will receive an upfront payment from Statoil in meeting various costs.  What we are seeing here is likely an effort on the part of Cairn to rebuild it’s exploration portfolio.

If you wish to see a complete map of Greenland that includes all current offshore exploration blocks, please do so by redirecting yourself to our ‘Greenland Exclusive Economic Zone / Oil and Gas Licenses‘ page.

Greenland Exclusive Economic Zone / Oil and Gas Licenses

The US Geological Survey has had a key hand in developing the enthusiasm toward Greenlandic offshore hydrocarbon exploration as it has, over the last years, put out a number of publications related to the undiscovered oil and gas resources of Greenland and eastern Canada.

The following related publications are available from the US Geological Survey

According to the USGS’s 2008 West Greenland-East Canada Province report, there lay an undiscovered 7,275 million barrels of oil, 51,816 billion cubic feet of natural gas, and 1,152 million barrels of natural-gas liquids in the area north of the Arctic Circle, between Canada and Greenland.  These figures are staggering, and have quite obviously enticed investors and operators in securing the licenses shown within the above map.  As of today, only western (and some southern) exploration licenses have been granted.

Licenses were awarded in late 2010 to some of the more notable exploration firms such as Shell, Statoil, ConocoPhillips, Cairn Energy, Maersk, Dong and NUNAOIL.  Blocks were granted that cover an area of 70,768 km^2.  Exploration has been in progress since, but as of yet there have been no major hydrocarbon discoveries. The Scottish Cairn Energy has come out with several press releases indicating that wells have been turning up dry. Other firms have had to follow suit.

Opinion

It is all too easy to become struck with the Arctic fever.  People tend to think big amongst rumours of fortunes.  This has almost always been the case when it has come to freshly issued licensing blocks.  People were referring to Greenland as the ‘Next Dubai’ while news sources such as the Washington Times were reporting on almost confirmed assumptions of future wealth.

A 2009 Washington Times article made the following comments toward the possible future independence of Greenland.

Denmark currently provides a large subsidy to Greenland’s government — about $700 million this year or more than $10,000 for every person in Greenland. The subsidy makes up about 60 percent of the government budget.

But when and if oil revenues start to come in, Denmark will reduce the subsidy accordingly. When the subsidy is fully paid off, Greenland officials say, they will begin to seriously discuss the possibility of becoming an independent country.

It is altogether obvious that the Greenlandic economy will continue to require Danish subsidies in order to maintain social programs if there will be no major discoveries.  Apart from Danish subsidies, the economy is critically dependent on fish and textile exports along with whaling.  Fortunately, the game is a bit like Battleship.  It is entirely possible that as exploration continues again through 2012, a drill will be set up in just the right spot to yield the next monster hydrocarbon reserve.  You can also bet your bottom Krone that upon such a discovery, independence would not be too far away.

The only problem with be that of cost.  Millions have been spent in exploration yielding almost nothing.  Environmental and Inuit groups have also been doing their part in holding down the brakes.  Pro drilling parties are going to have to stand ground for a few years while pushing for more licensing blocks in eastern Greenland.