The Scottish Oil Club February 2006

transcript

16 February 2006

Exploration in the Atlantic Margin

The Scottish Oil ClubFebruary 2006

Graham StewartFaroe Petroleum

16 February 2006

Content

1. Why does Faroe Petroleum exist?2. Why explore in the Atlantic margin?3. Changing fortunes of the Atlantic margin4. What next for Faroe Petroleum

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Why does Faroe Petroleum Exist?

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• Atlantic margin explored for 20 years:– 100+ wells– No commercial discovery

• Focus was on structural plays

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1990 1992 1994 1996 1998 2000 2002 2004 2006

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1992-1993

• Faroes– Rights to resources in the

subsoil• Foinaven/Schiehallion

– Significant discoveries– Near “white zone”

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- 1994

Foinaven

Schiehallion

1990 1992 1994 1996 1998 2000 2002 2004 2006

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1994 - 1997

• Faroes– Data acquisition

commences• Focus

– Judd Basin– Foinaven play

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- 1997

Foinaven

Schiehallion

1990 1992 1994 1996 1998 2000 2002 2004 2006

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Foinaven Play

• Had worked nearby• Same geology expected• “similar” geophysical characteristics found• Restricted to one basin

Combined trap

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1998-1999

• White zone dispute between Faroes and UK resolved

• Oil price collapsed– Economics of prospects looking difficult

• Several oil company mergers/takeovers– Fewer companies competing for acreage– Restructuring within the oil industry

• Less focus on exploration

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Faroe Petroleum - StrategyEstablished in 1998 as Faroese oil company:

• focusing on exploration and appraisal projects – starting in Faroes

• building a high potential value portfolio inthe Atlantic margin and North Sea

• participating in a dynamic drilling programme with significant equity

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Strategic focus

Seismic Exploration Appraisal Development Production Secondary Recovery

- - - Capital Gain- - - Production growth

Primary focus

Secondary focus

Increasing Value

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Why explore in the Atlantic margin?

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Atlantic margin under-explored

• Over 2,400 E&A wells drilled on the UKCS to date

• Only 4 drilled in Faroes – 1 success

• UKCS matured in places – but not WoS

• Recent WoS discoveries may lead to new infrastructure • improving

economics of future discoveries

WoS region accounts for less than 10% of all E&A wells drilled on UKCS

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Summary…for the geologists• Faroe Shetland Basin

– Is a large geographic area (similar to UK Viking Graben, but less explored)– Contains more, large un-drilled structural traps than the North Sea– Younger tectonic events (Atlantic opening in the Tertiary)– However, basalt masks deep structures & historic data quality poorer

• Similar Tectonic history compared to North Sea, namely:– Palaeogene subsidence - accumulation of major submarine fan reservoirs and maturing the

Jurassic source rocks– Widespread deposition of Upper Cretaceous cap rock – Jurassic rifting and source rock deposition

• Same source rocks as North Sea: Kimmeridge Clay– Larger gas kitchen in Faroe Shetland (due to thicker Cretaceous-Tertiary overburden)– Additional mid Jurassic source rocks

• Reservoirs:– High performance Palaeocene reservoirs comparable with North Sea e.g. Foinaven,

Schiehallion– Widespread Lower Cretaceous reservoirs– Pre-Cretaceous reservoirs of lower quality than North Sea– Commercial production from Devono-Carboniferous (Clair) comparable to North Sea

(Buchan, Stirling)

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Significance of Atlantic margin

UKCS Average Field Discovery Size vs Atlantic margin discoveries (mmboe)

er Alb

Atlantic Margin Fields/Discoveries

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What has Faroe Petroleum been up to?

• 1998: – Faroese company formed ahead of 1st Faroes Licensing Round

• 2000: – Faroes 1st Round: awarded 2 licences FP/Eni

• 2002: – established presence in UK – Aberdeen – to source people and capital

• 2003: – AIM flotation– drilled first Faroese well (Licence 002) – shows only

• 2004: – UK 22nd Round: awarded 6 licences, 2 operated, 10% to 100% equity

• 2005: – acquired North Halibut Licence in Outer Moray Firth from Shell and Esso– awarded 2 licences 10% to 100% equity in Faroes 2nd Round– awarded 3 new (promote) licences in Moray Firth all as operator in UK 23rd Round– acquired Eni’s 75% stake and operatorship of Licence 002 in Faroes

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Atlantic margin position

Gross Exploration Acreage in the North Atlantic Margin - by Company

vron FP

arko BP

man AP EN

XoM BG

WoS Faroes

Source: Faroe Petroleum

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Cross section

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Overview of current portfolio

15 licences 5 in Faroes

2 operated by FP, 2 Statoil & 1 Eni equity stakes - between 10% and 100%

6 in UK West of Shetlands2 operated by FP (100%) in shallow water each a discovery, adjacent to Clair oil field2 operated by Chevron, 1 by Shell and 1 by OMV -10% to 25% equity

4 in UK North Sea – new playshallow water in prolific area4 operated by FP

All with significant potentialshallow and deep watervariety of discrete play types6 seismic surveys completed in 2005

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Meanwhile, back at the ranch…

…changing fortunes of the Atlantic margin…

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Foinaven

Schiehallion

1990 1992 1994 1996 1998 2000 2002 2004 2006

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• 1st FaroesLicensing Round– 7 licences (4 + 3)– 8 well

commitments

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Foinaven

Schiehallion

1st Faroes Licensing Round

1990 1992 1994 1996 1998 2000 2002 2004 2006

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• 3 wells drilled in Judd Basin– Traces– Small accumulation– 170m HC column (Marjun)

• Results positive for first wells• BUT…far from what was expected

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Foinaven

Schiehallion

Marjun

2 dry holes –BP& Statoil

1990 1992 1994 1996 1998 2000 2002 2004 2006

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What went wrong?

• Geology was not as expected– Lack of seal

• Geophysical characteristics– Lithology (not hydrocarbons)

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Nick Loizou (1995 – 2002)

• Structural Traps– 38% of drilled wells– 60% success rate

• Stratigraphic traps– 50% of drilled wells– 0% success rate

• Combined traps– 12% of drilled wells– 25% success rate

• AVO– 81% lithology– 19% hydrocarbons

Stratigraphic trap Combined trap

Structural trap

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2002-2003

• Marimas– Traces

• Cambo– “discovery”

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- 2003

Foinaven

Schiehallion

Marjun

1990 1992 1994 1996 1998 2000 2002 2004 2006

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• 2nd Faroes Licensing Round– 7 licences– No well commitments

• Rosebank/Lochnagar– Stacked discovery

• Cambo “appraisal”• Laggan (gas) – test• Clair comes on stream

– (discovered in 1977!)

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- 2005

Foinaven

Schiehallion

Marjun

Rosebank/Lochnagar2nd Faroes round

1990 1992 1994 1996 1998 2000 2002 2004 2006

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2006 and beyond

Foinaven

Schiehallion

Marjun

Rosebank/Lochnagar2nd Faroes round

US$50 ?2 dry holes –BP& Statoil

7-8 wells in 2006

1990 1992 1994 1996 1998 2000 2002 2004 2006

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What next for Faroe Petroleum?

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Projected Forward Drilling Schedule

13121110987654321 ExplorationExploration

committed expected

AppraisalAppraisal

2006 2007 2008

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Evolution of Faroe Petroleum

• 1998-2000 started in Faroes– now 5 licences - 2 operated

• 2003 expanded into UK WoS– 6 licences – 2 operated

• 2005 expanded into UK North Sea – 4 licences – all operated

• 2006 expanding into Norway– ??licences??

• Atlantic margin a continuing theme

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Faroe Petroleum’s Focus Today

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Now for some snaps

…of the Faroes…

16 February 2006

Thank you

The Scottish Oil Club February 2006

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