Focus on Dutch Oil and Gas 2015

Contents

Foreword 4

Executive summary 6

1 Reserves and Investment opportunities 8

1.1 Reserves and resources - PRMS 9

1.2 Productionforecastforsmallfields 10

1.3 Profitabilityofsmall-fielddevelopmentintheNetherlands 12

1.4 Returnoncapitalemployed,profitabilityoflong-termE&Pinvestments 13

1.5 Comparisonofreinvestmentlevels:theNetherlandsinglobalcontext 15

1.6 StablefiscalregimeforE&PintheNetherlands 16

2 E&P activities, innovations and collaboration 18 2.1 DutchMiningAct 19

2.1.1 Stateparticipation 19

2.2 Environment-relatedregulations 20

2.2.1 Onshoreexplorationandproduction 20

2.2.2 Offshoreexplorationandproduction 20

2.3 EnvironmentalImpactAssessments 20

2.4 Cooperativeauthorities 23

2.5 Prospects&stranded-fields 25

2.6 Innovationandcollaboration 25

2.7 MaturefieldsintheNetherlands 27

2.8 Recoveryfactors 28

2.8.1 Impactofvariousparametersontherecoveryfactor 31

2.8.2 Operatorperformance 32

2.9 Saltprecipitation 33

3 Cost-effective development, operations and abandonment 34 3.1 Cost-effectivedevelopment,howtoreduceCAPEX? 35

3.2 Shallowgas–low-costdevelopment 37

3.3 FocussingonOPEXreduction 38

3.4 Whatisthewindowofopportunityforoffshoreinfrastructureandwhataretheresourcesatrisk? 39

3.5 Decommissioningplanningandcost,opportunitiesforcollaboration? 40

4 Exploration: remaining potential of the Dutch continental shelf 44 4.1 Explorationstudies 45

4.2 Explorationopportunities 46

4.3 Explorationactivity 48

4.4 Forecastingrisksandresourcesinexploration 49

4.5 Shallowgasopportunities 52

4.5.1 Shallowgasportfolio 53

4.5.2 Economicsofshallowgasleads 54

Foreword

ThereputationofnaturalgasintheNetherlands,and

especiallyitsproduction,hasbecomeincreasingly

controversialinrecentyears.Thereiswidespread

socialconcernaboutvariousaspectsrelating

totheseactivities.Itisgenerallyrecognised,for

example,thatearthquakesinGroningenarecaused

bygasproduction,andtherearealsoconcernsabout

thepotentialeffectsoffutureshale-gasproduction.

Climatechangecausedbyfossilfuelsisalsoamajor

concern.Theseissuesresultedinthefactthatmany

peopleintheNetherlandsnowhaveanegative

viewofgasproduction.Asthisisthenewreality,

theE&Pindustryneedstoaccepttheimportance

ofaddressingsociety’sconcerns.Itisnowmore

importantthaneverforallpartiesintheE&Psector

tocooperateinminimisingtheadverseimpactsof

activitiesandpromotinggreatertransparency.

Berend Scheffers

4

Inviewofthesocialpressuretoreduceproduction

fromtheGroningenfield,everycubicmetreof

gasthatcanbeproducedfromsmallfieldsismore

thanwelcome,especiallyasthiswillreducethe

EU’sdependenceonimportedgas.Inaddition,

theobjectiveoftheDutchgovernment’sEnergy

Agreementisfor16%ofthecountry’senergyto

comefromrenewablesourcesby2023.Eventhen

84%ofourenergyneedswillhavetobemetby

energyconservationmeasuresornon-renewables.

Naturalgasisthefossilfuelofchoiceforminimising

emissionsofgreenhousegasesasithasthelowest

CO2footprintofallfossilfuels.DemandforDutch

gasisexpectedtoremainconsiderablealsoinview

ofthecurrenteconomicrecoveryandtheneedfor

securityofsupply.Dutchsmallfieldsare,therefore,

becomingincreasinglyimportant,giventhatnatural

gasproductionfromtheGroningenfieldisbeing

reduced.

Wehavesofarproducedover1500BCMfrom

smallfieldsintheNetherlands,whileapproximately

550BCMisstillleftintheground,asindicatedin

theDutchreservesandresourcebase.Profitmar-

ginsonDutchgasproductionareattractiveinspite

ofadropinoilpricesand,toalesserextent,gaspri-

ces,alongsideincreasesinbothCAPEXandOPEX.

Torecovertheremainingreservesitisessentialthat

E&Pcompaniesremaincommittedtoinvestingin

theNetherlands.

EBNfirmlybelievesthattherearestillplentyof

opportunitiesfornewdevelopments,bothonshore

andoffshore,butespeciallyoffshorethewindowof

opportunityisdecreasingasthelifespanofcritical

infrastructurereachestheendofitslifetime.This

editionofFocusonDutchOil&Gasoutlinesthe

remainingopportunities,expectations,thechallenges,

howwecomparewithotherNorthSeacountries

withrespecttoinvestmentregimesandexploration

successesandbyEBNsuggestedpathsformaximi-

zingeconomicrecoveryofDutchoilandgas.

Innovativetechniquescancreatenewopportunities

forprofitablydevelopingfieldsandextendingfield

life.Minimum-facilityplatforms,forexample,can

significantlyreduceCAPEXandOPEX,withwalk-to-

workvesselsreducingthenumberofhelicoptertrips

andsofurthercuttingoperatingexpenditure.E&P

companies,servicecompaniesandR&Dorgani-

sationsarecurrentlycooperatinginseveraljoint

industryprojectsaspartoftheTKIUpstreamGas

programme,whichisseekingtoidentifyinnovative

waysofextendingfieldlife.Anotherissuerequiring

innovativeideasisplatformandwellabandonment.

Thebiodiversityunderandaroundourplatformsis

currentlybeingstudied,and‘rigs-to-reefs’solutions

mayofferpotentialforbetterdecommissioning.

Explorationandproductionofgasandoilfrom

Dutchsmallfieldscontributetostateprofits,

securityofsupplyofkeyenergysourcesandare

thereforeofgreatvalueforsociety.Ajointcommit-

menttomaximizeeconomicrecoverysafely

andresponsiblyisthereforenotonlyrequiredfor

theE&Psectoritselfbutalsotocontinuegenerating

contributionstosociety.

5

Executive summary

Focus on Dutch Oil & Gas 2015 provides you with

the current state and future prospects of the oil

and gas industry in the Netherlands. Cooperation,

transparency, investment and window of opportu-

nity are key items this year.

Astheageingoffshoreinfrastructureinthemature

southernNorthSeaapproachesdecommissioning,

thewindowofopportunityforE&Poperatorsin

theNetherlandsisrapidlyclosing.TheE&Pindustry

mustactquicklytodeveloptheremaininggasreser-

vesandmaturethegasresourceswhileplatforms

andpipelinesarestilloperational.Oncecritical

infrastructurehasbeendecommissioned,remaining

reservesandresourceswillbestranded,andthese

gasvolumeswillremainstrandedunlessproduced

ormaturedtoreserveswithinthenextfewyears.

Small-fieldsproductionandreservesareindecline.

Productionin2014fromsmallfieldsinwhichEBN

participateswas24.5BCM.Yetsmallfieldsstillcon-

tainsignificantreserves(159BCM)and,with191

BCMofcontingentresourcesandover200BCM

ofprospectiveresources,reservesreplacementis

considerable(70%).Profitmarginsongasproduction

remainattractive,althoughlastyear’sprofitability

decreasedasaresultofacombination

oflowergaspricesandhigherOPEX.

Thecombinationofsteadilyrisingproductioncosts

anddecliningproductionmeansthatUnitTech-

nicalCost(UTC)isincreasing.Inevitablythiswill

ultimatelyresultininfrastructurebeingabandoned.

Thistrendcanbesloweddownbynewreserves

maturation,byincreasingultimaterecoveryand,

lastbutnotleast,bycuttingcoststhroughcloser

cooperationbetweenoperators.

Thiscooperationandcoordinationbetweenthe

differentstakeholdersisespeciallycriticalwhen

infrastructureisneartheendofitseconomiclife

asdecommissioningofkeyinfrastructurewillclose

thewindowofopportunityformaturingcontingent

andprospectiveresourcesintoreserves.Thereare

severalwaystoaddressthis,withend-of-fieldlife

measuressuchasfoaminjection,velocitystrings,

compressionandinfilldrillingcommonlybeing

appliedtoincreasetherecoveryfactorinageing

fieldsandtoaddBCMswithEOFLmeasures(an

estimated0.2to0.5BCMperyear).Astudyofthe

performanceofsmallfieldsshowsthereisstill

scopeforincreasingtherecoveryfactor.Several

jointindustryprojectsarecurrentlyexecutedto

innovateandoptimisetechniquesusedinend-of-

fieldlifeproduction.

6

Noveldesignsforsatelliteplatformscanreduce

bothCAPEXandOPEXandtherebyalsohelpto

matureresourcestoreserves.Reducedfunctionality,

suchasplatformswithouthelicopterdecksorliving

quarters,reducesCAPEXandsoallowsdevelopment

ofsmallandstrandedfieldsthatwouldotherwisebe

uneconomic.Low-pressure,shallowgasprospects

areparticularlysuitedforsatelliteplatformswith

reducedfunctionality.Monotowerdesignshave

beenshowntobetechnicallyfeasible,eveninwater

depthsofdownto50m,whileinitialfeasibility

studiesshowthatcostsavingsofupto50%are

achievableonsuchstructures,compared

toconventionaldesigns.

BeforeanyE&Pactivitycanbegin,Dutchlegislation

requiresoperatorstoobtaina‘licencetooperate’.

Thisfirstlymeansmeetingalltheadministrative

requirements.Itisbecomingincreasinglyimportant,

however,alsotoobtaina‘sociallicencetooperate’,

withstakeholderengagementandmitigationof

environmentalimpactsbeingkeyinthisrespect.

Historically,gasdevelopmentsintheNetherlands

havegenerallybeenveryprofitableforinvestorsas

wellastheState,andtheyremainattractiveevenat

thecurrentgasprices.Also,thelonger-termprofi-

tabilityofDutchE&Pinvestmentslookspromising.

Althoughreturnoncapitalinvested(ROIC)forthe

Dutchsmallfieldsfellfrom36%in2013to19%

in2014,globallythedecreaseoftheROICofE&P

investmentshasbeenstronger,asthesearemore

vulnerabletooilpricevolatilitythantheDutch

small-fieldsportfolio.

EBNseekstomaintaingasproductionfromsmall

fieldsashighaspossible.Althoughannualproduc-

tionisexpectedtoremainabove20BCMinthe

coming5years,afasterdeclineisthanforecastedto

setin.Theriskedproductionforecastuptotheyear

2030showsthatiftheknownportfolioisdevelo-

pedatthecurrentdrillinganddevelopmentrate

(‘businessasusual’scenario),annualproductionfrom

smallfieldswillfallto10BCMby2030.The‘upside’

scenarioalsotakesintoaccountpotentialcontri-

butionsfromsourcesotherthanknownreservoirs

andestablishedplays,andfromnoveltechnologies.

Inthisscenario,gasproductionfromsmallfieldsin

2030maystillbeashighas20BCM.

ThesouthernNorthSeaBasinisamaturegasbasin

thatstillcontainsadiversemixofnewplays.Additi-

onalexplorationtargetsarelikelytoresultfromnew

studiesintheNorthernDutchOffshore,including

theshallowgasportfolio.EBNhasdevelopedaseis-

miccharacterisationsystemthathasidentifiedover

20amplitude-basedleads,withindividualin-place

volumeestimatesofupto2.5BCM.

Thehistoricalexplorationsuccessrateof55%for

wellsintheDutchsectorissupportedbyafavoura-

blefiscalregime.TheNetherlandscontinuestooffer

attractiveconditionsforE&Pinvestmentsinterms

ofavailableopportunities,returnsoninvestment,

favourablecommercialconditionsandtaxregu-

lations.However,thecurrentlylowoilpricesand,

toalesserextent,gaspricesmeanthatattracting

sufficientinvestmentsinthismaturebasintoharvest

thesizeableremaininggasresourceswillpresenta

challenge.

Tosummarize,nowisthetimetofindanddevelop

theremaininggasreservesandtomaturethegas

resourcesbeforetheoffshorewindowofopportunity

closesforgood.

7

1 Reserves and Investment opportunities

8

The Petroleum Resources Management System (PRMS)

EBN2015

Dis

cove

red

Co

mm

erci

al

Production Resource cat.

Reserves

On production 1

Approved for development 2

Justifi ed for development 3

Sub

-co

mm

erci

al

ContingentResources

Development pending 4

Development unclarifi ed or on hold 5

Development not viable 6

Unrecoverable

Un

dis

cove

red

ProspectiveResources

Prospect 8

Lead 9

Play 10

Unrecoverable

1.1 Reserves and resources - PRMS EBNadoptedtheSPEPetroleumResource

ManagementSystem(PRMS)in2009andhassince

successfullyuseditforsixyears,resultinginconsis-

tentandbetterreportingofreservesandresources.

ImplementationofthePRMShasmademonitoring

andforecastingofhydrocarbonmaturationand

resourcereplacementmuchmoretransparent,as

wellasstandardisingthereportingofreservesand

resourcesandmakingbenchmarkingtheoperators’

portfoliosandperformancemucheasier(SPE

170885,E.Kreftetal.,2014).

HistoricaldevelopmentofPRMSvolumesshowsthat

theoverallsmall-fieldsportfolioisindecline.Thiscan

beattributedtoincreasedcumulativeproduction,

whichisonlypartlycompensatedforbyreserves

maturation.Totalgasproductionfromallfieldsin

whichEBNparticipateswas66BCMin2014,of

which24.5BCMwasproducedfromsmallfields(i.e.

allfieldswiththeexceptionoftheGroningenfield).

Productionfromsmallfieldsdeclinedby2BCM

overthepastyear.Inthepastfewyears,volumesin

thereservescategorydecreasedbyabout4%per

year,withthisdecreasebeingfullyattributableto

the‘on-production’category1.Sincethereduction

inreservesamountstoonlyonethirdofthetotal

annualproduction,ongoingmaturationfromthe

contingent-resourcescategorytothereserves

categoryiscontinuingtoprovesuccessful.Alongside

maturationfromthecontingent-resourcescategory,

maturationfromtheprospective-resourcescategory

tothecontingent-resourcescategoryisoccurringat

approximatelythesamerate.Ongoingmaturation

maintainstheDutchgasportfolioatareasonable

level,withtheresultthattheNetherlandsremains

an attractive area to invest in.

9

Small-fieldsreservesandresourcesdecreasedfrom

234BCMGE(GroningenEquivalent)in2007to

159BCMGEin2014.

Thereductioninreservesispartlycompensated,

however,bymaturingcontingentandprospective

resourcesintocategory3reserves,orbyapproving

newprojects(category2reserves)andupdating

theultimaterecoveryestimatesforexistingprojects

(category1reserves).Althoughtherelativeimpor-

tanceofthesethreefactorsvariesfromyeartoyear,

maturingexistingresourcesintoreservesandappro-

valofnewprojectsarecurrentlythemostimportant

factors.In2014,thereservesreplacementratiowas

some70%.

Recentinvestmentsresultedin7fields(6gasfields

and1oilfield)comingonstreamin2014.Together

withnewwellscomingonstreamin2014,the7new

fieldscontributed1.2BCMGEand2900BBLSto

the2014small-fieldsproductionof24.5BCMGE.

OilproductionintheNetherlandsshowsanupward

trend.

1.2 Production forecast for small fields

Althoughmanyopportunitiesexist,theDutchE&P

sectorhasnotmanagedtoslowdown,letalone

haltthedecline(currentlyabout4%ayear)in

annualproduction.Thisisdespitethetotalnumber

ofopportunitiesbeinghigherthaneverinterms

ofthenumberofprospects,aswellastechnical

projects.Theassociatedvolumesofrecoverable

gasaresmall,andthisimpliesthattheonlywayto

counterthedecreaseinannualproductionisby

implementingmoreprojects.Whilemanyoperators

intheNetherlandsacknowledgethis,thecurrent

investmentslevelisnotsufficienttosustaincurrent

annualproductionlevels.EBNfirmlybelievesthat

theportfolioissufficientlylargeandattractiveto

slowdowntherateofdecline.However,iftheknown

portfolioisdevelopedatthecurrentdrillingand

developmentrate,annualproductionfromsmall

fieldswillgraduallydeclineto10BCM/y(GE)by

2030.InpreviouseditionsofFocusonDutchOil

andGas,thisproductiontrendhasbeenlabelledthe

‘businessasusual’(BAU)scenario.

Ontheotherhand,ifallpotentialcontributionsfrom

sourcesotherthanestablishedplays,reservoirs

PR

MS

rese

rves

an

d r

eso

urc

es (B

CM

GE

)

1. Fields on production

2. Approved for development

4. Development pending

3. Justifi ed for development

5. Development unclarifi ed or on hold

6. Development not viable

8, 9, 10 Prospects, leads and plays

2012 2013 2014

700

600

500

400

300

200

100

0

Remaining reserves and resources from small fi elds

EBN2015

>200

54

135

2220

130

14

>200

70

114

22

124

2017

>200

61

100

24

117

1830

10

andtechnologiesaretakenintoaccount,theannual

small-fieldsgasproductioncouldbeashighas20

BCM/y(GE)in2030.This‘upside’scenarioincludes

maximisingthevalueofthecontingentproject

base,assumingahigherdegreeofmaturationof

contingentresourcesthaninthe‘businessasusual’

scenario.

Anothersignificantcontributioncouldcomefrom

tightgasfields.TheNetherlandshasprovengas

resourcesintightsandstones.Althoughidenti-

ficationandproductionofmovablegasintight

sandstonespresentsachallenge,technicaladvances

inhydraulicfracturingandexperiencegainedin

previouswellscannowbegintounlockthetightgas

portfolio.

Incontrasttotightgas,thepresenceoftechnically

producibleshalegasintheNetherlandshasnotyet

beenproven,thusmakingitdifficulttoestimatethe

potentialfuturecontributionofshalegas.Whilethe

prospective-resourcesvolumesofshalegas(PMRS

categories9and10)arethoughttobesignificant,

ongoingpublicandpoliticalcontroversyaboutshale

gasactivitiesmakespotentialfutureproductioneven

moreuncertain.Bytheendof2015,thereshouldbe

moreclarityaboutwhetherafirstshale-gasexplora-

tionwellcanbedrilled.Ifsufficientshalegasisfound

intheNetherlandsandcouldbedevelopedinan

environmentallyresponsibleandsociallyacceptable

manner,withthesupportofkeystakeholders,shale

gascouldaccountforamajorshareofDutchnatural

gasproductionafter2030.Althoughongoingrese-

archindicatesthatDutchshalegasplaysmayhave

goodpotential,onlydedicatedexplorationwellswill

conclusivelyoutlinethecountry’sshalegaspotential.

Lastbutnotleast,akeycontributiontothe‘upside’

scenariocanbemadebysimplyincreasingexplora-

tionefforts,i.e.drillingmoreexplorationwells,

increasingexplorationfornewplaysandpushingthe

boundariesofexistingplays.EBNstronglysupports

researchintonew,ignored,ormissedplays,cur-

rentlyfocusingontheNorthernandNorth–Eastern

DutchOffshore.Asproductionfromtheseplays

couldincreaseannualproductionfromsmallfieldsby

dozensofBCMs,EBNwillcontinuetoencourageits

industrypartnerstopursuetheseopportunities.

Smal

l fi e

lds

rese

rves

(BC

M G

E)

2007 2008 2009 2010 2011 2012 2013 2014

250

225

200

175

150

125

100

75

50

25

0

Small fi elds maturation

EBN2015

■ Offshore reserves minus production

■ Onshore reserves minus production

■ Offshore reserves maturation

■ Onshore reserves maturation

11

1.3 Profitability of small-field development in the Netherlands

Theprofitmarginsonsmall-fieldsproductionarestill

attractive.Wehaveestimatedpastrevenues,costs

andprofitsassociatedwithprivateinvestmentsin

Dutchsmallfields.Althoughproductioncostsand

depreciation(areflectionoftheCAPEX)haveincre-

asedovertheyears,gaspriceshavealwaysbeen

sufficientlyhightogeneratesignificantprofits,both

forindustryandsociety.Despitetherecentdramatic

fallinglobaloilprices,marketpricesforNorth-West

Europeangashavesofarremainedreasonablysta-

ble.Inviewoftherecentlyimposedproductionlimits

fortheGroningenfieldandtheapparenteconomic

recovery,whichwillincreasedemand,theoutlook

fornaturalgaspricesintheNetherlandsremains

attractive.

BC

M/y

60

50

40

30

20

10

0

Scenario-based, risked production forecast for small-fi elds gas production

EBN2015

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

20

30

20

35

20

40

■ Produced and in production (cat 1)

■ Produced and in production (no EBN)

■ Approved or justifi ed for development

(cat 2 & 3)

■ Development pending (cat 4)

■ Development unclarifi ed (cat 5)

■ Development currently not viable (cat 6)

■ Prospective resources (cat 8 & 9)

■ High case contingent resources (cat 5)

■ High case contingent resources (cat 6)

■ Tight gas development (cat 9)

■ Shale gas development (cat 9)

■ Increased exploration effort (cat 9 & 10)

UpsideBusiness as usual

Margins of small fi eld production

Net profi t Taxes DepreciationProduction costs Finding costs

2006 2007 2008 2009 2010 2011 2012 2013 2014

Pri

ce (€

cen

t/m

3)

- Findings costs: mainly geology & geophysics (G&G) costs (including seismic surveys and expensed dry exploration wells);- Depreciation: on a unit-of-production (UOP) basis (depreciation of successful exploration wells, which are activated, is included in this category);- Production costs: including transport, treatment, current and non-current costs;- Taxes: Including Corporate Income Tax (CIT) and State Profi t Share (SPS).

30

25

20

15

10

5

0

EBN2015

12

1.4 Return on capital employed, profitability of long-term E&P investments

The‘Marginsofsmallfieldproduction’histogram

showstheaverageprofitabilityofthesmall-fields

portfolioinagivenyear,butthelongtermcapital

characteristicsofE&Pinvestmentsalsorequire

insightregardingitscapitalefficiency.

EBNhasthereforequantifiedandvisualisedan

analysisof‘ReturnonCapitalEmployed’(ROCE)

foroursmall-fieldsportfolioofassetsoverthepast

decade.TheROCEisafinancialratiothatmeasures

acompany’sprofitabilityandtheefficiencywith

whichitscapitalisemployed.Theanalysisshows

thatROCEwasveryhighinthepast,buthasbeen

decliningsince2009.

TheROCEistheratioofEBIT(‘EarningsbeforeInte-

restandTax’)and‘CapitalEmployed’.EBITisheavily

dependentonthegasprice,whichisvolatile.‘Capital

employed’showsasteadyincrease,reflectingthe

factthatdeclininglevelsofproductionrequirean

increasinglevelofinvestments.

WealsoconsideredtheDutchsmall-fieldsROCE

inaninternationalperspective.InNovember2013,

PricewaterhouseCoopers(PwC)publishedan

analysisfor2006-2012:‘Drivingvalueinupstream

Oil&Gas,lessonsfromtheenergyindustry’stop

performingcompanies’.WehaveaddedtheDutch

small-fieldsportfoliotoPwC’sgraph.PwCpresents

theROCEasacombinationoftheproductof

operatingmargin(=EBIT/Revenue)–ameasureof

costefficiency–andcapitalproductivity(=Revenue/

Capitalemployed),ameasureofacompany’sability

togenerateturnoverfromitsassets.TheDutch

small-fieldsportfoliohasbeenplottedagainstPwC’s

19topperformers(outofatotalsetof74)for

thesetwomeasures(averagedoverthe2006-2012

period).Asindicatedbytheisobarsinthegraphmost

ofthesetopperformershadROCEsofbetween30%

and50%,whereastheDutchsmall-fieldsportfolio

generated70%overthisperiod.Thefactthatthe

Dutchsmall-fieldsportfolioROCEissohighisattri-

butablenotsomuchtotheoperatingmargin,but

insteadtocapitalproductivity.Althoughwerealise

thatmoreinvestmentsarerequiredovertheyears

togenerateproductionandturnover,thereturnon

capitalemployedremainsverycompetitive.

EBN2015

Return on Capital employed - Small fi elds portfolio

140

120

100

80

60

40

20

-

3.500

3.000

2.500

2.000

1.500

1.000

500

-

ROCE EBIT (Earnings before interest and tax) Capital employed

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

RO

CE

(%)

EB

IT, C

apit

al E

mp

loye

d (E

UR

Mill

ion

)

13

InadditiontocalculatingtheROCE,wehavealso

quantifiedthehistoricalROIC(ReturnOnInvested

Capital),whichtakestaxesintoaccount.

Ouranalysisshowsthatinvestingingasdevelop-

mentintheNetherlandshasonaverage,beenvery

profitable.The36%for2013intheROICgraphis

farhigherthanwhatwebelieveisrepresentativefor

investmentselsewhereintheworld.Wehavecom-

Return on Capital employed for the Dutch small fi eld portfolio compared to top performers in the Global Upstream Oil & Gas sector (2006 - 2012)

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0

Upstream Capital Productvity

ROCE=70%

ROCE=50%

ROCE=30%

PTT

TotalStatoil

PDVSAExxonMobil

PetroChina

ENI

PetrobrasChevron

ShellNovatekImperial Oil

InpexMOL

CNOOC

Marathon Oil

OMV

BHP Biliton Ecopetrol

Dutch small fi eld portfolio

0 0,2 0,4 0,6 0,8 1 1,2 1,4 1,6

Up

stre

am O

per

atin

g M

argi

n

EBN2015

• ROCE = Upstream Operating Margin * Upstream Capital Productivity

• Upstream Operating Margin = EBIT / Revenue

• Upstream Capital Productivity = Revenue / Capital employed

Source: ‘Top Performers in the Global Upstream Oil & Gas Sector’ (PwC, November 2013, 2006-2012)

EBN2015

Return On Invested Capital - Small fi elds in the Netherlands

70

60

50

40

30

20

10

0

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

RO

IC (%

)

14

paredourannualfigureswiththeROICsofsixmajor

oilandgascompanies,whoseworldwideactivities

generatedROICsof7%to15%in2013.

AlthoughtheDutchsmall-fieldsROICfellto19%

in2014,itcansafelybeassumedthattheROICsof

globalE&Pinvestmentsalsodecreased,especially

giventheseROIC’sbeingmorevulnerabletothe

recentfallinoilpricesthantheDutchsmall-fields

portfolio.

1.5 Comparison of reinvestment levels: the Netherlands in global context

EBNalsomonitorsthereinvestmentlevel(RIL),

beingtheratiobetweeninvestmentsandfree

cashflow.ThisindicatestheextenttowhichE&P

operatorsreinvestprofitsgeneratedhereintonew

explorationandfielddevelopmentactivitiesinthe

Netherlands.

Althoughwebelievethereisaconsiderableportfolio

ofattractiveprospectiveandcontingentresources,

thisisnotalwaysreflectedintheRILforsmallfields,

whichinmostyearsisaround30-40%.In2014,it

wasaround50%,asaresultofhigherinvestments

andbecauseoflowergaspricesthaninprevi-

ousyears.Theremainingcashiseitherinvested

elsewhereintheworldorpaidoutasdividendto

shareholders.Itisgoodtoseethatinvestments

increasedlastyear,especiallysincethisincreaseis

partlyattributabletoincreasedexplorationefforts.

AlthoughglobalcapitalbudgetsforE&Pactivities

furtherdeclinedinthepastyear,webelievethatthe

Dutchbasin,especiallyincomparisonwiththerest

oftheworld,containsplentyofattractive,relatively

low-riskandlow-capitalopportunitiesthatcouldsuit

E&Pinvestors’portfolioswell.Notwithstandingthe

factthatthereinvestmentlevelfortheDutchsmall

fieldsportfoliohassignificantlyincreasedin2014it

stilllagstheglobalreinvestmentrange.Wearethe-

reforeaimingforfurthergrowthofthereinvestment

levelbyencouragingadditionalinvestments.

EBN2015

Reinvestment level of Dutch small fi elds compared to Global range

2000

1800

1600

1400

1200

1000

800

600

400

200

0

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Investment level NL Reinvestment level (right axis)

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

€ m

illio

n (1

00

% N

T)

Global rangereinvestment

level

Rei

nves

tmen

t le

vel (

%)

15

1.6 Stable fiscal regime for E&P in the Netherlands

Maintainingastableandattractivefiscalregimefor

E&PisakeyconsiderationfortheDutchgovern-

ment.Changesintaxregulationsinthepastdecade

havegenerallybeenbeneficial,bothforthesectoras

wellasforsociety.Themostimportantchangewas

theintroductionin2010ofthe‘MarginalFieldTax

Allowance’(MFTA).Thisallowancetargetspotential

investmentsanddevelopments,includingexploration

wells,inmarginaloffshoregasfieldsthatwould

nototherwisebeprofitableforinvestors.Whether

applicationsfortheMFTAaregrantedisdetermined

bythree‘technical’parameters:thefield’s(expected)

volume,itsdistancetoexistinginfrastructureandits

(expected)productivity.

SincetheMFTAwasintroducedin2010,48appli-

cationsfortheallowancehavebeensubmitted.Of

these,24weregranted,while5wererejectedand

19 are under consideration.

Themarginalfieldtaxallowanceespeciallyaimsto

promoteexplorationdrillingforprospectiveresour-

ces.Thismeansthat,whenanMFTAapplicationis

awarded,anexplorationwell’sdry-holeriskis,toa

largeextent,carriedbythegovernment.Wehave

soughttocomparethistothesituationinother

countriesaroundtheNorthSea.IntheNether-

lands,only32%(net)ofthecostsofadryholeare

bornebyprivateinvestors,whereasthiswouldbe

45%withouttheMFTA.Theonlycountrywhere

thisriskislowerisNorway(becauseofitshightax

rate).Since2000,companiescanrequestEBNto

participateinexplorationwellsforastakeof40%,

andthishasbecomestandardpractice.Thisfurther

reducesprivateinvestors’financialriskforadry

wellto19.2%,whereaswithouttheMFTAitwould

amountto27%.

Pleasenotethatthehistogramreflectsthesituation

priortotherecentUKtaxchangesandexcludes

participationbyEBN.

Comparison dry hole cost sharing between private investors and State

State costs

State via marginal fi eld allowance

Private investors’ costs

Please note:Graph shows comparative fi guresfor 2014, prior to the recent UK tax changes.

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

EBN2015

TheNetherlands

55%

13%

32%

UnitedKingdom

62%

-

38%

Germany

55%

-

45%

Denmark

64%

-

36%

Norway

78%

-

22%

16

Inadditiontothesignificantexplorationopportuni-

tiesintheNetherlands,combinedwiththecountry’s

healthyhistoricaleconomicsuccessrate(seechapter

4ofthisreport),thefinancialframeworkforexplora-

tionintheNetherlandscanalsoberegardedasvery

attractive.

AlthoughtheE&PinvestmentclimateintheNether-

landsremainsattractive,itisimportanttocontinue

monitoringhowremainingresourcescanbematured

inordertomaximiseeconomicrecovery,bothfor

thebenefitofsocietyandinvestors.Thereforethe

governmentandtheE&Psectorhavestartedevalu-

atingtheexistingallowance,aswellasconsidering

newstimulationmeasures.

17

2 E&P activities, innovations and collaboration

18

Acquiringa‘licencetooperate’intheNetherlandsis

anextensiveprocedure.Bothsubsurfaceandsurfa-

ce-relatedadministrativerequirementshave

tobemet.Inadditiontotheseadministrativerequi-

rements,a‘sociallicencetooperate’isbecoming

increasinglyimportant.Stakeholderengagement

andmeasurestoreduceenvironmentalimpactsare

expectedtofacilitatesucha‘sociallicencetooperate’.

2.1 Dutch Mining Act Themainadministrativeproceduresandregulations

governingactivitiesinthedeepsubsurfaceofthe

Netherlandsarelaiddowninthe2003DutchMining

Act(MA),MiningDecreeandMiningRegulation.The

MAalsoregulatessubsurface-relatedinfrastructural

works,includingplatforms,pipelines,terminalsand

metering.Beforeanyhydrocarbonexplorationor

productionactivityintheNetherlandscanbegin,a

licencehastobeobtainedfromtheDutchMinistry

ofEconomicAffairs(theMinister).Theapplication

proceduresforonshoreandoffshoreexplorationand

productionlicencesarebrieflydescribedbelow.

Applicationsforonshorelicenceshavetobe

submittedtotheMinisterinduplicate.TheMinister

willpublishtheapplicationintheGovernment

Gazette(Staatscourant)andtheOfficialJournalof

theEuropeanCommunity,and,duringaperiodof

thirteenweeksafterpublication,othernaturalor

legalpersonsmaysubmitapplicationsforthatarea.

Meanwhile,theMinisterobtainsgeological,financial

andtechnicaladviceonboththeapplicationandthe

applicant.TheMinistershallreachadecisiononan

applicationforalicencewithinsixmonthsafterits

receipt.

Theapplicationprocedureforanoffshoreexploration

licenceisslightlydifferent:first,thedraftdecisionon

anapplicationispublished.Othernaturalorlegalper-

sonscanthensubmitviewsonthedraftdecision.The

Ministerwillthenpublishthefinaldecision,whichcan

takeaccountofthesubmittedviews.

2.1.1 State participation

Bylaw,theDutchStateparticipatesintheproduc-

tionofhydrocarbonsthroughEBN.Participationby

EBNisoptionalinthecaseofexplorationactivities

andmandatoryinthecaseofproductionprojects.

EBNparticipatesbysigninganAgreementof

Cooperation(AoC)withthelicensee(s)toestablish

acontractualjointventure,inwhichEBNholdsa

standardinterestof40%.

Onshore

Offshore

Competent authority

*dependent on the situation

Licence to operate

EBN2015

Explorationlicence

Explorationlicence

Productionlicence

Productionlicence

Environmentallicence

Environmentallicence

Miningenvironmental

licence

Construction /drilling / testing

Construction /drilling / testing

Construction /Drilling /

production

Construction /drilling /

production

BARMMnotifi cation

BARMMnotifi cation

BARMMnotifi cation

BARMMnotifi cation

Productionplan

Productionplan

Exploration phase

Exploration phase

Production phase

Production phase

Ministry of Economic affairs

Ministry of Economic affairs / municipality

EIA* EIA

EIA

19

2.2 Environment-related regulations Regulationsonenvironmentalpermits,wateruse,

buildingrightsandspatialplanningcanbefoundin

severaldocumentsofDutchlegislation,including

theMiningAct,theActonGeneralProvisionsof

EnvironmentalLaw(Wabo),theFloraandFaunaAct,

theSpatialPlanningActandtheNatureConserva-

tionAct.

2.2.1 Onshore exploration and production

An‘EnvironmentalLicence’(Omgevingsvergunning)is

requiredforbuildinganexplorationorproduction

siteonland.Thisenvironmentallicenceisa‘one-stop

shop’coveringvariousaspects,includingspatialplan-

ning,construction,natureandmonuments.However,

thesevariousaspectsareregulatedinseparateacts,

decreesandregulations,eachwiththeirowncompe-

tentauthority(minister,provincesormunicipalities).

Exploration-AnEnvironmentalLicenceisrequired

fornon-mining-relatedactivitiesassociatedwith

onshoreexploration,suchasroadandsiteconstruc-

tionandtreefelling.Thecompetentauthorityis

generallythemunicipalityinwhichtheactivitiesare

located.AnEnvironmentalLicenceisnotneeded

fordrillinganexplorationwellunlesstheoperatoris

intendingtoerectapermanentfacilityorisplanning

anexplorationwellinaprotectedarea,suchasthe

Natura2000areasdefinedbytheEuropeanCom-

mission.InthesecasestheMinisteristhecompetent

authorityforthispartofthelicence.

Theenvironmentalrequirementsforexploration

(bothon-andoffshore)addressedinthe‘Decreeon

commonenvironmentalrulesforminingactivities’

(‘BARMM’)arenotcoveredbyanenvironmental

licence.Operatorsplanningexplorationactivities

havetomeetspecificenvironmentalrequirements

laiddownintheBARMMDecreeandhaveto

announceexplorationactivitiestotheMinisterfour

weeksinadvance(‘BARMMannouncement’).

Production-Afterreceivingaproductionlicence

fromtheMinister,theoperatorhastoobtainan

EnvironmentalLicencetobuildthenecessary

productioninfrastructureandproductionplant.The

Ministeristhecompetentauthorityforthislicence

(includinganynon-mining-relatedaspects).

2.2.2 Offshore exploration and production

Mostlegislationontheenvironment,wateruse,buil-

dingrightsandspatialplanningisnotapplicableon

offshoreactivities.Operatorsdonot,therefore,have

toobtainanEnvironmentalLicenceforoffshoreacti-

vities.However,theMAhasintroducedthe‘Environ-

mentalMiningLicence’(Mijnbouwmilieuvergunning)

foroffshoreproductionactivities.Furthermore,

operatorsplanningexplorationactivitiesalsohaveto

complywiththeenvironmentalrequirementsinthe

BARMMDecreeandannounceexplorationactivities

totheMinisterfourweeksinadvance.

2.3 Environmental Impact Assessments

AnEnvironmentalImpactAssessment(EIA)isapro-

ceduredesignedtoensurethatproperconsideration

isgiventotheenvironmentalimplicationsbeforeany

decisionismade.Environmentalassessmentscanbe

undertakenforspecificprojects,suchasplatformsor

pipelines,orforstrategicplansorprogrammes.The

EIAreportdefinestheproposedinitiative,describes

thecurrentsituation(base-line-conditioninventory),

evaluatesthenegativeandpositiveimpactsofthe

proposedactivitiesontheenvironmentandcompa-

resthesewiththeimpactsofpossiblealternativesin

ordertoidentifyanyenvironmentallylessharmful

alternatives.Thisgiveslicenseesabetterunder-

standingofpotentialenvironmentalimpactsearly

20

onintheprocessandenablesthem,ifnecessary,to

estimatethecostsofanymitigationorcompensation

required.TheEIAprocessalsoinvolvesamandatory

dialoguewithlocalstakeholders.Therearetwotypes

ofEIAprocedures,dependingonthetypeofproject:

Mandatory EIA:Allprojectslikelytohavesignifi-

canteffectsontheenvironmentaresubjecttoan

EIA,priortotheirapprovalorauthorisation.Inthe

caseofoilandgasproduction,anEIAisgenerally

requiredfortheproductionofhydrocarbonsabove

certainthresholdsandalsoforthetransportationof

hydrocarbonsabovecertainthresholds.Notably,an

EIAisnotmandatoryforexplorationactivities,such

asdrillingawell.

Discretionary EIA:Inthecaseofcertainother

projects,nationalauthoritiescandecidewhetheran

EIAisneeded.Thecategoriesofprojectsrequiring

anEIAintheNetherlandsarelistedintheEnviron-

mentalManagementAct.

‘Social’ licence to operate, case 1: the Bergermeer gas-storage facility

AdepletedgasreservoirinNorth-Hollandnear

Alkmaar,theBergermeerfield,nowhasasecond

lifeasthebiggestopen-access,seasonalgas-storage

facilityinEurope,withaworkingvolumeof46TWh/

4.1BCM.Toconvertthisfieldintoastoragefacility,

theoperatorTAQAhasdrilled14newwellsovera

two-yearperiod,andbuiltacompression(6x13KW)

andtreatmentfacilityonanindustrialestate.

Thesurfacefacilitiesareconnectedtothewellsby

an8-km-longpipelinepartlylaidthroughruralareas.

AnEIAwasmandatoryforthedrillingandthe

constructionofpipelinesbecausesomeofthedrilling

locationsplannedwereinaNatura2000area.Alter-

nativeswerecomparedintheEIA,whiletheautho-

ritiesalsorequestedanassessmentofalternative

treatmentandcompressionlocations.Localcitizens

andtherelevantmunicipalityobjectedtothedecision

tograntastoragelicence,withthesubsequent

litigationgoingtotheCouncilofState,thehighest

administrative-lawbodyintheNetherlands.

Injection/production location during the drilling and construction phase in the Bergermeer (courtesy of TAQA energy B.V.).

21

Tominimisetheenvironmentalimpactofthe

pipeline,TAQAagreedtocarryoutthemitigating

measuressuggestedintheEIA,including:

• Erectinga10-meter-highnoisebarrier.

• Usingalow-noisedrillingrigrunningon

electricity,limitingnight-timedrillingnoisetoa

maximumof43dBatadistanceof300m.

• Usinggreenlightstoilluminatingthesiteatnight

asthesearelessdisturbingtobirdsandhumans.

• Puttingastricttraffic-controlplaninplaceto

minimisetrafficcongestion.

• Maintaininganestingareaof18.5hectares

adjacenttothedrillingsitetocompensateforthe

lossofnestinglocationsforbirds.

• Completingthe14wellheadsincellarsbelow

groundlevel,thusminimisingobstructionduring

theoperationalphaseandensuringpassers-by

hadapermanentlyopenviewofthesurrounding

landscapeacrosstheproductionlocation.

• Signingcivil-lawagreementswiththemunicipa-

litiesandtheprovince,inwhichTAQApromised

tooperateatransparentprocedureforany

residentssufferingdamageasaresultofearth

tremorsorconstructionwork.

Thesemeasuresallcontributedtothesuccess

oftheproject,whichwascompletedontimeand

withinbudget.Since1April2015,theBergermeer

gas-storagefacilityhasbeenplayingacrucialrolein

ensuringsecurityofgassupplyandstrengthening

theNetherlands’positionasthemajorgashubin

North-WestEurope.

‘Social’ licence to operate, case 2: decommissioning of the Berkel-4 production location

From1983untilSeptember2013,theBerkel-4

productionlocationnearRotterdamproducedoil

fromtheBerkelfieldintheRijswijkconcession.Over

theyears,theoperatorNAMproduced26million

barrelsofoilfrom22wells,usingcharacteristic

noddingdonkeypumpingunits.

TheMiningActrequiresminingworkstobe

decommissionedafterproductionceases.Conse-

quently,theoperatoriscurrentlyintheprocessof

decommissioningtheproductionlocationunder

thesupervisionoftheStateSupervisionofMines

(SodM)andrestoringthesitetoitsoriginalcondi-

tion.TheMiningRegulationsstipulatethatbeforea

wellisabandoned,theoperatorhastoplugitdown-

holeatreservoirlevelandremovethecasingtoat

leastthreemetresbelowgroundlevel.Onceallthe

wellshavebeenproperlyplugged,allsurfacemining

installationshavetobeclearedfromthesite.

Inthiscase,however,theoperatorwillalsoremove

thetubingtoalargerdepth,fromthetop1400

metresofall22wellsandplacethreecementplugs

atdifferentdepths,thusfurtherreducingtherisk

offuturecontaminationofthesubsurface.

Furthermore,thetopthreemetresofsoilwillbe

excavatedfromtheentiresiteandreplacedbyclean

soil,thusfurtherminimisinganyriskofresidualsoil

contamination.

Beforestartingtodecommissionanexisting

location,operatorsarerequiredtomakeaBARMM

announcementtotheMinister,describingthe

activitiesandplanningindetail.Thecontentsofthe

BARMMannouncementaredisclosedtoneighbou-

ringresidents,thusallowingthemtorespondand

22

provideinput.Althoughnotlegallyrequired,the

operatorinthiscasehasusedthatinputtoreduce

anydisturbancetotheunavoidableminimum.

Thefollowingmitigatingmeasuresweretaken:

• Aspecialtransportroutewasselectedtolimit

trafficandnoise,whileroadtransportwasalso

limitedtodaylighthourssoastoreducenoiseas

muchaspossible.

• Soundscreenswereputinplace,withdrilling

sloweddowntoreducenoiselevelsevenfurther.

• Adedicatedwebsitewasbuiltfortheoperations

soastokeeplocalresidentsinformedaboutthe

activities.

• Acontactwasavailableonsite24hoursadayto

handleanycomplaints.

• Adedicatedteamwasavailabletodealwithany

specificcomplaintsarising.Meetingswereheld

inpersonwithcomplainantssoastodetermine

theexactproblem,whileeffortswerealsomade

tofindimmediatesolutions,whereverpossible.

Problemsandtheirsuggestedsolutionswere

followedupwithinoneweekofthemeetings.

Decommissioningoperationsatthislocationare

scheduledtobecompletedbylate2017.Although

thesitewillhavebeentransformedintoagreen

pasturesuitableforagriculturaluse,theoperator

willretainownershipofthesitesoastoenable

monitoringofpossiblefutureactivities.Inacountry

wheredecommissioningwillinthefuturebemore

common,thisapproachisagoodexampleofhowto

doitsafelyandinasociallyacceptablemanner.

2.4 Cooperative authoritiesTheDutchcontinentalshelfisincreasinglybecoming

clutteredwithalargevarietyofinfrastructuralworks

ofmanydifferentusers.InadditiontotheE&P

industry,theSouthernNorthSeaaccommodatesan

increasingnumberofwindfarms,theshippingand

fishingindustries,aswellasthemilitary.Acommonly

heardcomplaintisthatthegrowingnumberof

regulationsishamperingE&Pdevelopmentplans.

However,somerecentprojectshaveproventhat

theauthoritiescanalsobeverycooperative.

Wintershall’sexplorationwellL06-7wasdrilledto

theeastoftheshippinglanewithinamilitaryexer-

cisearea.DevelopmentoftheHighPressure/High

Temperature(HP/HT)gasfieldL06-Bwasoriginally

plannedbysubseacompletionofthesuspended

Berkel-4 production location (courtesy of NAM B.V.)

23

explorationwellasthefieldissituatedunderneath

bothamilitarypracticeareaandashippinglane.

However,itbecameclearthatatie-backofthe

suspendedwellwasnottechnicallyfeasible.

DiscussionswiththeMinistryofDefencewere

initiatedtodiscussthepossibilityofdevelopingthe

marginalfieldwithafixedplatformandanewpro-

ductionwellfromwithintheexistingmilitarypractice

area,tothewestoftheshippinglane.Inviewof

themarginaleconomics,itwasdecidedtobuilda

minimum-facilitiessatelliteplatformwithroomfor

onlytwowellsafterapprovalwasobtainedof

theMinistryofDefence.

Anotherprojectdemonstratingthewillingnessof

boththeCoastguardServiceandtheInternational

MaritimeOrganisation(IMO)tocooperateisthe

developmentofWintershall’sF17Chalkoilfield,

whichissituatedalmostcompletelyunderneatha

(recentlyrevised)internationalshippinglane.The

developmentconcepthasyettobedefined,but

willideallyinvolvetheinstallationofoneormore

platformsonthecrestofthefield.TheIMOhas

agreedtoatrafficseparationschemetobeeffective

from1June2015sothatfixedsurfacefacilitiescan

beinstalled.

GDFSUEZ’sQ13-Amsteloilfieldislocatedonly

12kmoffthecoastofScheveningenandtheQ13-A

platformissuppliedwith25kVpowerthrougha

cablefromshore.Thepowercablepassesthrough

anoldsewagepipe,whichisnolongerinuse.

Allowingthisconduittobeusedavoidedtheneed

foranenvironmentallysensitivedunecrossing;

investmentsandemissionscouldalsobereduced,

whiletheinstallation’sreliabilitywasincreasedand

CO2 emissions decreased.

Inothercases,extensionstolimiteddrillingwindows

inshippinglanesandmilitaryareasweregranted

whendrillingwasdelayed.Theauthorities’pragmatic

approachavoidedadditionalmobilisationcostsfor

thetemporarysuspensionofwells.Permissionwas

alsogiventoTAQAtodrillanexplorationwellwithin

theRotterdamharbourapproachareaintheP18b

licence,although,intheeventofsuccess,develop-

mentwillhavetobesubsea.

TheCoastguardServiceprovedtobeveryhelpful

incoordinatingvariousactivities,especiallyduring

recentseismicdataacquisitionprojects,thereby

avoidinginterruptionsanddisturbancefromother

vessels.Forexample,Hansa’s1100km2M03/

N01/G18/H16survey,Sterling’s550km2F17/

F18surveyandWintershall’s900km2K18b/L16a

surveybenefittedgreatlyfromtheCoastguard

Service’scooperationduringtheacquisitionof3D

seismicdata;thisrequiredefficientmanoeuvringof

thestreamer,whichcanbeupto6kmlong,across

busyshippinglanes.

Satellite map of vessel traffic density in the North Sea

(http://www.marinetraffic.com/nl/)

24

2.5 Prospects & stranded-fields inventory

Strandedfieldsandprospectsshouldbekeptonthe

radar.AgreatexampleistheAmsteloilfieldinthe

Q13blockwhichwasdiscoveredin1962,hasbeen

strandedforalongperiodandisnowsuccessfully

broughttoproductionbyGDFSUEZ.TheQ13block

changedownershipmanytimesovertheyears,with

theAmsteloilfieldremainingastrandedfield.Deve-

lopmentwasfinallyundertakenbyGDFSUEZin

2011.Aplatformandpipelinewereinstalledin2013

andfirstoilwasrealisedinFebruary2014,with

evacuationtotheP15-P18infrastructure.Technical

solutionsandinnovationsandsuitableinfrastruc-

tureplayanimportantroleinthedevelopmentof

strandedfieldsandprospectsmayenableeconomic

development.

Inviewoffutureprospectandstrandedfield

development,itisgoodpracticetoplananyremovals

ofinfrastructureearlyonandtocarefullyreview

adjoiningprospects,nearbystrandedfieldsand

otherupsidepotential.AsEBNparticipatesinalmost

allexplorationandproductionlicences,itisuniquely

positionedtoprovideguidanceinthesereviews.

EBNhasdevelopedasimulationtool(InfraSim)to

assesstheeconomiclifeofinfrastructureelements,

basedoninputparameterssuchasproductionpro-

files,contingentresources,gaspriceandoperating

costs.EBNhasalsosetupadatabaseofprospects

andstrandedfields,albeitlimitedtothelicencesin

whichitparticipatesorhasparticipated.Another

simulationtool(ExploSim)hasbeendevelopedto

allowprobabilisticforecastingof‘futurevolumes’,

basedoninputparameterssuchasdevelopment

costs,gasprice,operatingcostanddrillingactivity.

2.6 Innovation and collaborationInnovationthroughindustrycollaborationbetween

operatorsandthesupplyindustrywillbeakey

elementincontrollingoperatingcosts(BOON

2012).In2015,EBNwillcarryoutitsoperating

costbenchmarkingexercisefor2014.

In2003Shell-UKandNAMformedtheONEgas

businessunittorationaliselogisticsoperationsin

theSouthernNorthSea.Thetwocompanieshave

alargeSouthernNorthSeaassetportfolioandhave

identifiedacost-savingopportunity:theyhavesince

starteddefiningtherequirementsandspecifications

foramaintenancevessel.TheKroonborgwalk-to-

workvessel,operatedbyWagenborgOffshore

Division,islaunchedin2015andhasa10-year

supportcontractforONEgas.Theimpressive

Kroonborgvesselisequippedwithdynamic

positioning,withamotion-compensatedAmpel-

mannwalkwayandBargeMastercranetofacilitate

maintenancevisitstoplatformsintheSouthern

NorthSea,andwillreplaceasmanyas20offshore

platformcranes.

The80-meter-longvesselisalsoequippedwith

inboardchemicaltanksforplatform-supplyor

well-treatmentpurposesandalargedeckspace.

Its40-strongmaintenancecrewwillsailbetween

Fisher woman looking at Q13-Amstel (courtesy of

GDF Suez E&P Nederland B.V.)

25

platformsintheSouthernNorthSea.Beingthe

firstvesselpoweredbyGTL(asyntheticdieselfuel

manufacturedfromnaturalgas),itsemissionswill

belowerthanthoseoftraditionalships.

TheE&Pindustryshouldalsolookforsynergieswith

otherindustries,suchastheoffshorewindindustry.

Promptedbytherapiddevelopmentofwindfarms

indeeperwater,Damenshipyardshasdeveloped

amaintenanceandservicevesseltosupportlarger

windfarmsfurtherfromshore.Thiswalk-to-work

vesselcanalso,however,beemployedtoservice

theE&Pindustry’snormallyunmannedsatellite

platforms.Thedynamicallypositioned90-meter-long

vesselwillbebuiltonspeculationandwillincludea

motion-compensatedgangwayandcrane.

InJune2015,EBNwillorganiseaworkshopfor

DutchE&Poperatorsandoffshoresuppliersto

explorefurtheropportunitiesforlow-costdeve-

lopments(newplatforms).Anotherimportant

topicduringtheworkshopwillbethepossibilityof

reducingoperatingcosts(includingmaintenance)of

existinginstallationsbyrelocatingsatellitefunctiona-

litiessuchasplatformaccess,cranesandaccom-

modationtosupportvessels.Otherapplicationsof

motion-compensatedinstallationsthatcansimplify

maintenanceoperationswillalsobeinvestigated

duringaseriesofinteractivesessions.

Inadditiontoplatformcosts,whichaccountfor

about30%ofdevelopmentCAPEX,drillingcosts,

whichaccountforabout50%,alsoofferscopefor

cost reductions.

Kroonborg walk-to-work maintenance vessel

(courtesy of NAM B.V.)

26

2.7 Mature fields in the NetherlandsAlmost90%ofthe282currentlyproducinggas

fieldsintheNetherlandsareeithermature,with

cumulativegasproduction(Gp)intherangeof

50-85%ofexpectedultimaterecovery(UR),orin

thetail-endphase(Gp>85%UR).Extendingthelife

ofthesefieldswillrequiremajoreffortsandhasthe

fullattentionofEBNandtheoperators.

Variousenhanced-recoverytechniquesarebeing

appliedtotheseageingassets,themostcommon

ofwhicharecompression,infilldrillingandother

end-of-field-life(EOFL)measurestocombatliquid

loading,suchasvelocitystringsandfoam-assistedlift.

Infilldrillingiscommonlyattractiveinfieldswhere

thestaticgasinitiallyinplace(GIIP)islargerthan

theobserveddynamicGIIP,mostlyasaresultof

50% Drilling costs

30% Platform costs

15% Pipeline costs

5% Brownfi eld costs

Subdivision of capital investments

EBN2015

100%

Fields grouped by fi eld size (GIIP) and maturity

EBN2015

< 0.1 BCM 0.1 - 0.5 BCM 0.5 - 1 BCM 1 - 5 BCM 5 - 10 BCM > 10 BCM

Nu

mb

er o

f fi e

lds

160

140

120

100

80

60

40

20

0

■ Startup (0 - 5% produced)

■ Mature (50 - 85% produced)

■ Plateau (5 - 50% produced)

■ Tail-end (85 - 100% produced)

101

423628

2332

10 11117 12

3 341211

27

reservoircompartmentalisation.Forfieldsinwhich

thisdiscrepancyexceeds1BCM,thesumofthese

discrepanciesforallfieldscombinedexceeds100

BCM.Reservesmaturationresultingfrominfilldril-

linginthesereservoirsisexpectedtoaddsome2–5

BCM/year(risked)between2015and2030.

Velocitystringsandfoam-assistedliftareapplied

inwellssufferingfromliquidloading.Thisoccurs

inmaturegaswellsinwhichthegas-flowrateis

insufficienttotransporttheliquidsthatenterthe

wellboreuptothesurface.Consequently,liquids

willaccumulateinthewellboreandcaneventually

killthewell.Gas-welldeliquificationisestimated

toincreaseawell’sultimaterecoveryfromroughly

85%to95%beforeabandonment.Severalgas-well

deliquificationtechnologiesareavailable,themost

commonbeingtheinstallationofvelocitystringsand

foam-assisted lift.

Thevelocity-stringtechniqueinvolvesinstallinga

small-sizetubingtoreplacetheoriginallarger-size

tubing,thusreducingthecross-sectionalflowarea

ofthetubingwhichincreasesthegas-flowvelocity.

Oncethegas-flowvelocityexceedsthecritical(loa-

ding)rate,liquidistransportedupwardsinsteadof

accumulatinginthewellbore.Adecreaseindiameter

alsochangestheflowrateatwhichgravitystartsto

dominatethefrictionalforces.Consequently,the

wellcanbeproduceddowntoalowergasrateuntil

thecriticalvelocitylimitisonceagainreached,thus

resultinginahigherultimaterecovery.

ReservesmaturationresultingfromEOFLmeasures

isexpectedtoaddapproximately0.2-0.5BCM/year

between2015and2030.

2.8 Recovery factors EBN’ssmall-fieldsportfoliocomprises282produ-

cingfieldsand45abandonedfields.Thesefields

exhibitawidevarietyofrecoveryfactors,i.e.the

fractionofthegasinitiallyinplacethatwillultimately

berecovered.Bothparameters,thegasinplace

(GIIP)andultimaterecovery(UR),aresubjectto

varyingdegreesofuncertainty.Theuncertaintiesare

typicallyhigherintheearlystagesofproductionand

progressivelyreduceinthelaterstages.

Thefollowingpresentsastatisticalsummaryfor

producingandabandonedfieldsinwhichEBN

participates.Thefieldsaregroupedintosixdifferent

categoriesbasedtothefieldsize(i.e.,GIIPvalue)

andareshownaccordingtotheirlocation(onshore/

offshore),theproducingformationsandthefield’s

maturity.Itisnotedthatfieldswhichproducefrom

differentformationsaretreatedasonefield.These

statisticsarepartofanongoingstudyintoobserved

recoveryfactorsandshouldbeconsideredprelimi-

nary.However,withmanyfieldsapproachingtheir

endoffieldlife,statisticsarebecomingincreasingly

representativeandreliable.

Photo: Velocity string

28

Mostofthefieldsintheportfolioareinthe1to5

BCMGIIPcategory.Thesefieldsproducemainly

fromPermianRotliegendsandstonesandareatthe

tail-endofproduction.

Fields by fi eld size (GIIP) and producing reservoir

EBN2015

< 0.1 BCM 0.1 - 0.5 BCM 0.5 - 1 BCM 1 - 5 BCM 5 - 10 BCM > 10 BCM

Nu

mb

er o

f fi e

lds

160

140

120

100

80

60

40

20

0

■ Carboniferous

■ Upper North Sea

■ Rotliegend

■ Jurassic

■ Lower Triassic

■ undefi ned Rotliegend or Carboniferous

■ Lower Cretaceous

■ Upper Triassic

■ Zechstein

12 1

4

2

5

33

6137

3934

22

53

1

11

2

11

8

14

88

1

112

2

2

20

394

110

94

Fields by fi eld size (GIIP), onshore and off shore distribution

EBN2015

< 0.1 BCM 0.1 - 0.5 BCM 0.5 - 1 BCM 1 - 5 BCM 5 - 10 BCM > 10 BCM

Nu

mb

er o

f fi e

lds

160

140

120

100

80

60

40

20

0

■ Offshore abandoned

■ Offshore producing

■ Onshore abandoned

■ Onshore producing

37

1415

6

3929

1752

228

14

162

6

85

1 2

13

21

29

Thefollowingparametersareimportantforrecovery

factor(RF)calculations:

• Gasinitiallyinplace(GIIP);thisreferstotheraw

gasinplaceandisobtainedfromestimatesofthe

grossrockvolume,net-to-grossratio,porosity,

gassaturationandthegasexpansionfactor;

• Connectedgasinplace(CGIIP);thisisalsocalled

material-balanceGIIPordynamicGIIPandrefers

totheportionoftheGIIPthatisconnectedto

existingwells.

• Ultimaterecovery(UR);theestimationofwhatthe

fieldwillproducebythepredictedendoffieldlife

• Recoveryfactor(RF);theURdividedbyGIIP

• Connectedrecoveryfactor(CRF);theURdivided

byCGIIP.

Ingeneral,thehighertheGIIP,thehigherthe

recoveryfactor.Onaverage,theRFoffieldssmaller

than1BCMis50%,increasingto80%forfields

largerthan10BCM.IftheURresultingfromfuture

projectsisincluded,therecoveryfactorforallGIIP

classeswillincreaseslightly(notshown).However,

smallerfieldsstillconsistentlyachievelowerRFs

thanlargefields.Thestrongcorrelationbetween

Connected recovery factor

Connected recovery factor for all fi elds

EBN2015

1

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

Co

nn

ecte

d r

ecov

ery

fact

or

< 0.1 BCM 0.1 - 0.5 BCM 0.5 - 1 BCM 1 - 5 BCM 5 - 10 BCM > 10 BCM

RF

Recovery factor for all fi elds

EBN2015

1

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

Rec

over

y fa

cto

r

< 0.1 BCM 0.1 - 0.5 BCM 0.5 - 1 BCM 1 - 5 BCM 5 - 10 BCM > 10 BCM

0.41 0.43 0.49 0.67 0.77 0.79

30

RFandfieldsizewasnotpreviouslyrecognisedand

isthesubjectofanongoingstudyseekingabetter

explanationoftheobservedbehaviour.

Iftheaverageconnectedrecoveryfactor(CRF)is

plotted,asimilartrendisobserved.TheCRFgives

anindicationofthetechnicalabilitytorecoverthe

knownvolumes.Volumeswhichcannotberecovered

bymeansofconventionalproductionmethodsare

usuallyproducedaftertheapplicationofenhan-

ced-recoverytechniques,asdescribedabove.

However,economicfeasibilityaffectstheapplication

ofthesetechniques,i.e.theadditionalrecoverable

volumeshavetobelargeenoughtojustifythehigher

cost.Smallerfields(smallerconnectedvolume)may

provetechnicallymorechallengingtoproduce,while

theadditionalrecoverablevolumesmayalsonot

justifytheextrainvestments.

Ifend-of-field-lifetechniquesarenotapplied,the

observedCRFinfactindicatesaverageconventionally

recoverablevolumes,whichmaybetheeconomiclimit

forsmallerfields.Thisissubjectoffurtherstudy.

2.8.1 Impact of various parameters on

the recovery factor

Producingreservoir-Therecoveryfactoralsovaries

dependingontheproducingformation.Mostofthe

DutchfieldsproducefromthePermianRotliegend

(RO)ortheTriassicMainBuntsandstein(RB),which

areshownhereforcomparison.

Thehistogramforthesetworeservoirunitsclearly

showsthatinthecaseoflargerGIIPs,theBunter

fieldstendtohaveahigherrecoveryfactorthan

comparableRotliegendfields,whereasthePermian

Rotliegendfieldsshowahigherrecoveryfactorfor

smallerGIIPs.Thegeologicalfactorsbehindthis

phenomenonarecurrentlybeingstudied.

Tightgasreservoirs-Approximately32gasfields

inthecurrentportfolioareclassifiedastight

becauseoftheirlowpermeabilitiesandlowinitial

productivities.Ifthestatisticsofthesetightgas

fieldsareremovedfromtheoverallhistogram,the

overallrecoveryfactorisonlyslightlyhigher,thus

provingthattightreservoirscanbedevelopedand

producedwithrecoveryefficienciessimilartothose

ofnon-tightfields.

Permian Rotliegend Triassic Main Buntsandstein

Average recovery factor of Rotliegend and Triassic reservoirs

EBN2015

1

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

Rec

over

y fa

cto

r

0.1 - 0.5 BCM 0.5 - 1 BCM 1 - 5 BCM 5 - 10 BCM > 10 BCM

31

2.8.2 Operator performance

Wehaveobservedthattheaveragerecoveryfactors

inthevariousGIIPcategoriesalsovarybetween

operators.Wehaveillustratedthisinahistogram

showingonlythoseoperatorswithmorethanthree

fieldsperGIIPcategory.Inpractice,thismeansthat

someoperatorsachievehigherrecoveryfactorsthan

otherseventhoughtheyareproducingfromfieldsin

thesameGIIPcategory.

Av RF (min) Av RF (max)

Maximum and minimum average RF per GIIP class between the diff erent operators

EBN2015

1

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

Rec

over

y fa

cto

r

0.1 - 0.5 BCM 0.5 - 1 BCM 1 - 5 BCM 5 - 10 BCM > 10 BCM

All fi elds Without tight-gas reservoirs

Impact of tight fi elds on the recovery factor

EBN2015

1

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0

Rec

over

y fa

cto

r

< 0.1 BCM 0.1 - 0.5 BCM 0.5 - 1 BCM 1 - 5 BCM 5 - 10 BCM > 10 BCM

32

2.9 Salt precipitationProductionwellsingasreservoirsoccasionallyexpe-

rienceasignificantandacceleratingperformance

declineasrecoveryprogresses.Thisiscommonly

duetosaltprecipitationfromproducedwater.All

formationwaterscontainatleastsomedissolved

salts.Ifmuchformationwaterisco-producedfrom

agasreservoir,thedissolvedsaltmayprecipitate

intheporesofthereservoirrocknearthewellbore

aroundtheperforatedpayzone,particularlyin

maturefields.Thisphenomenonisreferredtoas

halitescale.Halitescalewillobviouslyimpairwell

performanceasitfillsthepores;thispreventsflow,

andmayevenculminateintotalpluggingofthepore

throats,thusreducingproductivity,andcanultima-

telyevenresultinabandonmentofwells.

Inordertomitigatehalitescaleformationinproduc-

tionwells,fresh-watertreatmentsareperformedat

regularintervalsduringproductionoperations.This

dissolvestheprecipitatedsaltandtransportsitup

tothesurfaceintheproducedwater.Theobjective

oftheseinterventionsistomaintaineconomic

productivityoreventuallyrestoreoriginalpermeabi-

lityandsorestoreproductionrates.Boththehalite

scaleitselfandthewater-washtreatmentsresultin

substantialproductionlosses.

Predictingtheseverityandlocationofsaltprecipi-

tationandthesubsequenteffectonpermeability,

flowbehaviourandcapillarypressurecharacteristics

remainschallenging.Amethodisthereforebeing

developedtomodeltheonsetandspeedofproduc-

tiondecline,aswellasmitigationstrategies.

Inordertounderstand,predictanddeveloptechni-

questomitigatehalitescale,EBN,Total,Wintershall,

GDFSuezandONEhavejointlyinitiatedtheSalt

PrecipitationJointIndustryProject(JIP)aspartof

theTopConsortiumforKnowledgeandInnovation’s

(TKI)UpstreamGasline.TheobjectiveofthisJIP

saltprecipitationprojectistomodelthephysical

phenomenathatoccuratmicro-porescaleinorder

tounderstandwhichparametersaffectsaltprecipi-

tationandthenscaleuptheresultstowellboreand

reservoirscale.Themacromodelwillbevalidated

byfielddataandcanthenbeusedtooptimise

productionstrategies.Sofar,anumericalmodelhas

beenbuilt,whichwillsoonbecalibratedwithdata

fromTNO’sexperimentsonoutcropcoresamples.

TheoperatorshaveprovidedfielddatatoTNOto

complementTNO’sexperimentalwork.

British,DutchandGermanSouthernNorthSea

operatorsarecurrentlysharingtheirexperiencewith

haliteprecipitationingaswells.EBNisthecoordi-

natorofanannualsaltprecipitationforumduring

whichtheparticipatingoperatorsandconsultants

givepresentationsabouttheirexperiencewithmiti-

gatingmeasuresandhaliteprecipitationmodelling.

Test set-up for salt precipitation JIP at TNO Rijswijk

33

3 Cost-effective development, operations and abandonment

34

3.1 Cost-effective development, how to reduce CAPEX?

Sincethefirstsatelliteplatformwasinstalledon

theDutchcontinentalshelfin1974,platform

designhasevolvedfromlargetopsidesona4-or

6-leggedjacketwithpermanentaccommodation

quarters,ahelideck,localpowergenerationanda

cranelargeenoughforoffloadingsupplyboatsto

monopodinstallationsthatarenormallyunmanned.

Asdevelopmentsmovedintodeeperwater,heavier

jacketswererequired.Althoughfieldsizesgradually

decreased,asdidthenumberofwellslots,jacket

weightgraduallyincreased.

Asadvancesintelecommunicationstechnology

maderemotecontrolpossible,manyinstallations

weretransformedintonormallyunmannedinstal-

lations.

Satellites: Increase of jacket weight & water depth versus time

Jacket weight Water depth Trendline (Water depth)Trendline (Jacket weight)

1974 1979 1984 1989 1994 1999 2004 2009 2014

Jack

et w

eigh

t (t

on

nes

)

Wat

er d

epth

(m)

1800

1600

1400

1200

1000

800

600

400

200

0

60

50

40

30

20

10

0

EBN2015

Satellites: Top side weight & well slots versus time

Top side weight Well slots Trendline (Well slots)Trendline (Top side weight)

1974 1979 1984 1989 1994 1999 2004 2009 2014

Top

sid

e w

eigh

t (t

on

nes

)

Wel

l slo

ts (#

)

1600

1400

1200

1000

800

600

400

200

0

18

16

14

12

10

8

6

4

2

0

EBN2015

35

Thenext-generationsatellitescouldthusbe

equippedwithonlytemporarylivingquarters,

giventhatmaintenancestaffnolongerneedstobe

permanentlybasedontheinstallations.Thisreduced

functionalityisreflectedinlowerinvestmentcosts

andhasallowedeconomicdevelopmentofmany

smalland/orpreviouslystrandedfields.

Althoughthetraditionaljacketsubstructureisstill

common,thefirstmonotower/tripodwasinstalled

ontheDutchcontinentalshelfin1986.In2005

and2009,NAMinstalled3monotowersatellites

equippedwithrenewableenergysystems(windtur-

binesandsolarpanels)andwithoutaccommodation

quarters,craneorahelideck:inotherwords,marine

accessonly.

In2014,WintershallinstalledtheL6-Bmonotower/

tripodwhichispoweredthroughanumbilicalfrom

ahostplatform.Thisfurtherreducestopsideweight

aspowergenerationisnolongerneededonthe

satellite.Thisminimum-facilitiesplatformhasa

topsideweightofonly170tonnesandissupported

byatripodsubstructurewithsuctionpiles,which

simplifiespossiblere-useoncethereservoiris

depleted.Theplatformwasinstalledasacomplete

structure,withinarecordtime,inasingle-liftopera-

tionaftertheentire1200tonnestructurehadbeen

transported‘inthehooks’ofarelativecosteffective

sheerlegvessel.Thisplatformisagoodexampleof

operatorsandtheDutchsupplyindustryworking

togethertoreducecoststhroughacollaborative

processthathasresultedinaninnovativedesignand

cost-effectiveinstallationmethod.Anotherexample

ofeffectivecostreductionistheincorporationofa

duplexsteelsubseacoolingloopsoastoreduceCO2

corrosionathightemperatures.Asaresult,alower-

costcarbonsteelpipelinecouldbeusedincombina-

tionwiththeinjectionofacorrosioninhibitor.The

sameapproachwassuccessfullyappliedbyWinters-

hallin2011initsK18-Golfsubseadevelopment.

Minimisingon-platformfacilitiesbyallowingonly

marineaccess,insteadofbothhelicopterandmarine

access,doesnotnecessarilymeantheinstallation’s

uptimeisreduced.Lookingatawell-knownoil-patch

saying,itcouldbearguedthat‘Ifitain’tthere,it

won’tbreakanddon’tneedfixing’.

L6-B platform in the hooks (picture courtesy of Wintershall Noordzee B.V./Scaldis)

36

NorthSeaconditions,withsignificantwaveheights,

canseriouslyhinderplatformaccessbyboat.Howe-

ver,thecurrentgenerationofvessels,equippedwith

motion-compensatedaccesssystemsandcranes,

allowsplatformfunctionalitytobereducedfurther,

withonlylimitedlossofuptime.Thisisespecially

trueforfunctionalitysuchaslargecranesthatare

usedinfrequently,butdorequireauxiliarysystems,

maintenanceandcertification.

3.2 Shallow gas – low-cost development

Thesuccessofcost-effectiveminimum-facilities

satelliteplatformscanbeofvalueforthedevelop-

mentofshallowgasleads.Shallowgasresearch

focusesonidentifyingshallowprospects(bright

spots)atdepthsdowntosome1000metresadditio-

naltotheeightshallowfields.

Manyoftheseprospectshaverelativelysmall

volumes;economicdevelopmentconsequentlyisa

challenge(section4.5).Cost-effective,reduced-func-

tionalityplatformdesignssuchasmonotower/

tripodsaresuitableforshallowgas,butpresentan

engineeringchallengeasthisdesignhasonlybeen

proveninwaterdepthsoflessthan40metresinthe

Netherlands.

MostDutchshallowgasfieldsarelocatedinwater

depthsofdownto50metres;hencethedesign

shouldbeabletowithstandthechallengingNorth

Seaconditions.Supportedbyanexperienced

engineeringcompany,expertsestablishedthata

monotowerdesignwouldbetechnicallyfeasiblefor

45-metrewaterdepths,providedthedesignand

manufacturingprocessalsoconsidersfatigueissues

causedbythetoughNorthSeametoceanconditi-

ons.Initialfeasibilitystudiesshowthatcostsavings

ofupto50%canbeachievedcomparedtomore

conventionalsatellitedesigns,thusmakingitpossible

formoreprospectstobedevelopedeconomically.

Thefactthatgassalescontractsarenowadaysall

seller-nominatedalsohelpstomakedevelopments

moreeconomic,whileinstallationscanbeoperated

under more constant conditions.

Havingexploredtheopportunitiesforcost-efficient

stand-alonedevelopments,EBNiscurrentlyplanning

tofocusontheeconomicsofclusterdevelopment

ofmultipleshallowgasleadscombinedwithdeeper

targetsandonmorecost-effectiveexplorationofthe

shallowplaybyasingledrillingcampaigncovering

severalprospectsratherthanbydrillingshallow

prospectsonastand-alonebasis.Shallowgasoppor-

tunitiesarediscussedinchapter4ofthisreport.

Courtesy of IV

37

3.3 Focussing on OPEX reductionAsmentionedinchapter1,productionfromsmall

gasfieldsintheNetherlandsisdecliningsteadily.

EBNisaimingtoslowdownthistrend,giventhe

limitedwindowofopportunitythatremainsasthe

ageingoffshoreinfrastructure–platforms,pipelines

andwells–israpidlyapproachingdecommissioning.

However,productioncostsareincreasing,whilethe

decliningproductionfromoldergasfieldsmeans

thattherearefewerBCMstocarrythesecosts.

Moreover,olderinfrastructureinherentlyrequires

moremaintenancetocontinuesafeoperations.

Sofar,averageOPEX/m3iswellbelowthegassales

price,buttherearelargedifferencesbetweenthe

variousassets.Insomeassets,OPEX/m3 is fast

approachingorhassurpassedthegassaleprice.Itis

thereforeimperativetofindnewwaystoslowdown

thistrend.

EBN2015

OPEX per m3 off shore small fi elds in the Netherlands

7

6

5

4

3

2

1

0

2006 2007 2008 2009 2010 2011 2012 2013 2014

EU

R c

t/m

3 (G

E)

EBN2015

Gas production versus costs off shore small fi elds in the Netherlands

35

30

25

20

15

10

5

0

1400

1200

1000

800

600

400

200

0

Production OPEX CAPEX

2006 2007 2008 2009 2010 2011 2012 2013 2014

Gas

Pro

du

ctio

n (B

CM

GE

)

OP

EX

an

d C

AP

EX

(EU

R M

illio

n)

38

NexttoreducingtheOPEX,increasingtheproduc-

tionvolumeisevenmoreimportanttoslowdown

thistrend.Ofcourse,thelattercannotbeaccomplis-

hedeasilyandwillrequireadditionalinvestments.

Nevertheless,EBNbelievesthateconomically

beneficialinvestmentscanbeincreased,resulting

inaslowdownofthedownwardproductiontrend.

Thestablelevelofinvestmentsconfirmstheremai-

ningpotentialofattractiveopportunitiesin

thematureDutchbasin.

3.4 What is the window of opportunity for offshore infrastructure and what are the resources at risk?

Thecurrentresourcebasisisrapidlymaturing,and

newdiscoveriesanddevelopmentsaredecreasing

insize.Maximisingthevalueofgasresourceswillbe

key,whilereducingoperationalandcapitalexpenses

willhelpprolonginfrastructurelife.Itisimportant

todelaydecommissioningofinfrastructuresoasto

extendthewindowofopportunityfor(near-field)

explorationandmakeitpossibletobringexistingand

newdiscoveriesonstreambyimplementingboth

CAPEXandOPEXreduction.Inthepastfewyears,

cessationofproduction(COP)ofanumberofassets

hassuccessfullybeendeferred.

In2010,itwasestimated,onthebasisofreserves,

thatapproximately40platformswouldbeunder

threatofcessationofproductionwithinthenextfive

years.Asoftoday,onlyafewplatformshaveactually

beendecommissionedasmaturingcontingent

volumesandsuccessfulnewdevelopmentshave

contributedtoextendingtheeconomiclivesofthese

platforms.

The2015estimateofCOPbasedonreserves

onlyshowsasignificantcessation-of-production

peakinthenextfewyears.Manyplatformswhere

productionwassuccessfullyextendedwillagainbe

atriskinthenextfewyears.Withthecurrentgas

pricesandhighoperationalexpenditure,theindustry

hastofacethefactthatmanyplatformswillcease

productioninthenearfuture.

EBN2015

Window of opportunity is extended by maturing resources, but is inevitably closing

35

30

25

20

15

10

5

0

COP Prediction of platforms in 2010 based on reserves

COP Prediction of platformsin 2015 based on reserves Actually removed

2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040

Nu

mb

er o

f Pla

tfo

rms

39

ToillustratethedynamicsintheyearoftheCOP,we

haveestimatedtheimpactofmaturingcontingent

resourcesandseparatelytheimpactofmaturing

prospectiveresourcesregardingtherespective

infrastructureeffected.Obviouslymaturingofthese

resourceclasseswillinpracticetakeplaceinparallel.

Maturingcontingentresourceswillonlyslightly

postponethemomentofcessationofproduction

inthenextfiveyears.After2030,however,this

effectontheassetportfoliowillbecomeminimal.

Ifcontingentresourcesarematuredintoproducible

reserves,thelifespanof35%oftheplatformscanbe

extendeduptotwoyears,althoughextensionwill

befornolongerthanoneyearinthecaseof

theremaining65%.

Satelliteplatformsandsubseainstallationsarethe

mainfacilitiesthatwillceaseproductioninthenear

future.Decommissioningcan,ofcourse,alsobe

delayedtosomeextentbymaturingprospective

resourcestoaplatform’sproduciblereserves.

Althoughtheabsolutenumberofassetsaffectedby

anestimatedextensionplatformlifeislimited,the

extraproductionyearsandresourcevolumesare

neverthelesssubstantial.Thevolumesofcontingent

andprospectiveresourceshavebeenplottedagainst

thecessation-of-productionyearforspecificplat-

forms.Asmanyplatformsthatareexpectedtocease

productioninthenextfewyearshaveconsiderable

attachedvolumes,thecontingentandprospective

resourcesurgentlyneedtobedevelopedintime.

3.5 Decommissioning planning and cost, opportunities for collaboration?

Asmoreandmoreassetsarebecomingincreasingly

mature,decommissioningofinfrastructurewill

becomemorecommonandwillthereforecreate

anewsortofbusiness.Indeed,itisalreadya‘hot

business’forsomecontractors,andplanningof

decommissioningshouldbeontheoperators’radar.

EBN2015

Resource potential when off shore window of opportunity is extended

12

10

8

6

4

2

0

2015 2020 2025 2030 2035 2040

Lost

vo

lum

es w

hen

pro

du

ctio

n is

cea

sed

(BC

M)

Year of COP of offshore installation based on reserves

• Prospective resources • Contingent resources

40

Althoughdecommissioningactivitieshavestartedin

theDutchNorthSea,thisisdefinitivelynotamature

marketandexperiencecurrentlyremainslimited.

Todate,onlyafewcontractorsandoperatorshave

experienceofdecommissioning.Wintershallhas

activelydecommissionedafewplatformsinthelast

fewyears.TheK10-Bproductionplatform,Q5-A

subseainstallationandtwosmallsatelliteplatforms

Q8-AandQ8-Bhavebeensuccessfullyremoved

fromtheDutchsectoroftheNorthSea.Encouraging

contractorstoplanforflexiblefacilityabandonment

withinatwo-yearwindowcouldpotentiallyreduce

costsfortheoperator.

Operatorshaveestimatedthattotalabandonment

costswillamounttoapproximately€4.3billion.

Thisoperatorestimateincludespluggingandaban-

doning(P&A)theoffshorewellsandpipelines,aswell

asdecommissioningtheplatformstructuresinwhich

EBNparticipatesintheDutchSouthernNorthSea.

Abandonmentexpenditureoverthepasttenyears

amountedtoonly5%ofthesetotalestimatedaban-

donmentcosts.Asfortheonshoreassetsinwhich

EBNparticipates,operatorsareexpectingtohaveto

allocateapproximately€1.9billiontoabandonment.

However,theseareprovisionalestimatesonlyand

thesefigurestendtoincreaseeachyear.

Abandonment cost estimate on- & off shore for existing infrastructure

Abandonment cost estimate onshore - EBN share Abandonment cost estimate offshore - EBN share

2006 2007 2008 2009 2010 2011 2012 2013 2014

Tota

l ab

and

on

men

t co

st e

stim

ate

(mill

ion

€ -

EB

N s

har

e)

3000

2500

2000

1500

1000

500

0

EBN2015

Removal of platform K10-B (courtesy of Wintershall Noordzee B.V.)

41

Operatorcostestimatesperspecificabandonment

activitiesalsovarygreatly,maybebecausefew

assetshavesofarbeencompletelyabandoned,and

thereforeonlylimitednumbersofreferencecases

areavailable.

Abandonmentcostspertonnehavebeenplotted

forsatelliteandproductionplatforms.Theheavier

aplatform’stopsideandjacket,thelowerthecost

pertonne(€/tonne).Dutchoffshoreplatformsare

relativelysmall,withhalfofthemweighinglessthan

1500tonnesand75%lessthan2500tonnes.

Itisveryimportanttostartstrategicabandonment

planningnow,especiallyforthoseassetsthatcease

productionwithinthreetofiveyears.Inmostcases,

lackofaccuratedataanddrawingswillcomplicate

theplanningofdecommissioningprojects,especially

ifaproductionlicencechangedownershipduring

thelifeoftheinfrastructure.Corrosionofshut-in

platformsmayalsopresentarisk.

Wellplugandabandonment(P&A)projectsare

estimatedtoaccountforafurther40%ofthetotal

abandonmentcosts.Inmanycases,wellabandon-

Estimated abandonment costs off shore installations

2013 estimate

Offshore installations

Offshore exploration wells

Offshore interfi eld pipelines

Offshore production wells

EBN2015

50.4%

7.2%

5.6%

36.8%

Estimated abandonment costs per infrastructure type

EBN2015

Exploration well Production well Subsea (including dome) Satellite Production platform /integrated platform

Ab

and

on

men

t co

sts

per

item

€ m

illio

n

Type of infrastructure

70

60

50

40

30

20

10

0

42

menthasprovedtobemorecomplicatedthan

initiallyenvisaged,eitherbecauseaccuratewelldata

arenolongeravailableorbecausewellintegrityand

statusarepoorlyunderstood,butmoreimportantly

because‘pressurebehindcasing’regularlycompli-

cateswellP&Aprocedures.Theindustryhasfaced

costoverrunsinthefewdecommissioningprojects

thathaveactuallybeencompleted.Onecouldargue

ifthewellP&Ahasbeenthoroughlyestimatedand

wouldnotcontributetoabiggerportionofthetotal

decommissioningcostestimate.

Costsavingscouldbeachievedinabandonment

campaignsifoperatorscollaborateandsharetheir

experienceduringtheplanning,preparationand

definitionphasesofthesecampaigns.Preparingthe

platformforremovalandatthesametimeperfor-

mingthewellP&Amayalsohelptoreducecosts.

Thisrequireseffectiveplanningandcommunications

betweenanoperator’sdepartments.Inviewof

thehighcosts,however,thereshouldbesufficient

incentiveforoperatorsandtheserviceindustryto

seektodevelopandoptimiseefficientabandon-

menttechniquesandapproaches.EBNisplanning

toinventorizescenariosforabandonment,like

campaignsby,forinstance,removingcriticalpartsof

comparableplatformstructuresinbatchmode.

Asplatformshaveovertheyearsbecomeahavenfor

marinebiodiversity,theimpactofremovingentire

structurestoshoreshouldalsobeinvestigated.It

mightbebettertoleavesubseajacketsinplaceand

toremovethetopsidesonly.Thismaybeattractive

fromaperspectiveofsustainabilityandrelated

biodiversityaroundoffshoreplatforms.

Abandonment costs per tonne for satellites

EBN2015

500 - 1000 1000 - 1500 1500 - 2000 2000 - 2500 2500 - 3000 3000 - 3500 3500 - 6000 6500 - 10000

Eu

ro

Tonnage

25000

20000

15000

10000

5000

0

43

4 Exploration: remaining potential of the Dutch continental shelf

44

4.1 Exploration studies EBNcarriesoutexplorationstudiesinunderexplo-

redareasandonselectedsubjectstoincreasethe

explorationactivitylevel.Theseexplorationprojects

canbedividedintotwocategories.Thefirstcategory

areprojectswhichareexecutedatEBN.

EBNteamsarecurrentlyworkingonthefollowing

in-housestudies:

• ProspectivityanalysisoftheDEFABarea(ongoing)

• ProspectivityanalysisoftheG&Marea(started).

Theseareasareselectedbasedontheirper-

centagesofunlicensedacreage,thepresenceof

underexploredareasorplaysandthepresenceof

‘threatened’infrastructure.Otherin-housestudies

haveamixedobjective.TherecentlyinitiatedChalk

Formationevaluationstudy,forinstance,willsupport

assetmanagementinoptimizingdecisionsinboth

explorationanddevelopment.

Thesecondcategoryconsistsofprojectswhich

areexecutedinJointindustryprojectsandbyMSc

studentsincooperationwithvariousuniversities

andTNO.ThisenablesEBNtoexploreawiderange

ofexplorationrelatedsubjectsandtoimprovethe

transitionbetweenacademiaandindustry.

The following external studies were funded by EBN in 2014 and 2015:

Joint industry projects

• NewPetroleumsystemsinDutchNorthernOffshore(2014,2015TNO)

• FOCUSonUpperJurassicSandstones(2014,2015TNO)

• Geochemicalcompositionandoriginofnaturalgas(2015,TNO)

• Integratedpressureinformationsystemonshore&offshore(2014,TNO)

• HydrocarbonpotentialoftheLias(2015,TNO)

• Integratedmulti-clientZechsteinstudy,NorthSea(2015-2016,DurhamUniversity)

MSc student projects

• VolpriehausenprospectivityreviewinthenorthernFblocks;

• ReviewoftheLowerTriassicplayintheRoerValleyGraben

• Identifyingoverlookedexplorationopportunitiesfromby-passedpayanalyses.

• Howdo‘salt-inducedstressanomalies(SISA)’affectgasproduction

• Indicationsforintra-ChalksealsintheFblocksoftheDutchoffshore;

• SeismiccharacterisationofZechsteincarbonatesintheDutchNorthernOffshore;

• Theshale-oilpotentialofthePosidoniaFormationintheNetherlands;

• RegionalcontextofapotentialDinantianplay;

• SpecialcoreanalysisofthePosidoniashale;

• Seismic(AVO)responseofunconsolidatedreservoirsasfunctionofgassaturation;

• Stochastictime-depthconversion;

• Gascolumncut-offstudy;

• SaltreconstructionintheDutchNorthernOffshore;

• Reviewofexplorationinvestmentcriteria.

45

4.2 Exploration opportunitiesA new chance for the Zechstein-2

carbonate play

TheZechstein-2carbonatesformaprovenplayin

theSouthernPermianBasin,withoilproduction

inPoland,GermanyandonshoretheNetherlands.

EBNinitiatedandperformedastudyin2014to

investigatethepossiblepresenceofZechstein-2car-

bonatesalongtherimoftheElbowSpitHigh.Wells

andseismicindicatethepresenceofanon-basinal

faciesinthisarea.Sevenleadshavebeenidentified

(Jaarsmaetal.,2014)Hydrocarbonchargeprobably

comesfromScremerstoncoalsand/orZechstein

sourcerocks.ToprogressthisplayfurtherEBNis

supportingthemulti-clientintegratedZechstein

studyintheUK.

The Chalk: a proven, yet underexplored play

Ofthe71wellsthatdrilledthroughtheChalk

FormationintheDEFABarea,35didnottesta

Chalkstructureasthesetargeteddeeperobjectives.

Oftheremainder,17wellsdidnottestthestructure

inacrestallocation,thusleavingup-dippotential

untested;15wellsweredrywells,mostlikelyasa

resultofalackofhydrocarbonchargeoratop-seal

failure,andfourwellswere(un)commercialdisco-

veries.Inthestudyarea,morethan55structural

Chalk(up-dip)closuresremainundrilled,withan

estimatedSTOIIPof10-300Millionbblsperlead.

Lessobvious,potentialcombinationstratigraphic/

structuralChalktraps,suchastheHalfdanandAdda

fieldsintheDanishoffshoreandtheUKFifefield

closetotheNorthSeamedianline,remainuntested

intheNetherlands.

Dinantian carbonates: from tombstone to cave

In2012,theCalifornië-1geothermalwellnearVenlo

hasshownthatextensivekarstificationinDinantian

limestonesispossible,sheddingadifferentlight

onreservoirqualityatthislevel.Anumberofleads

thatstraddletheDutch-UKmedianlinehavebeen

identified;theseleadsarelocatedclosetoexisting

infrastructureandmaybecombinedwithNamurian

secondarytargets.

Approximate focus areas of exploration studies

Colour indicates exploration density

46

Tectonic model for the Northern Offshore

Atectonicmodelisbeingdevelopedforthe

NorthernOffshoreaspartoftheDEFABstudy.The

tectonicdevelopmentoftheregionfromtheDevo-

nianuptothepresentwasgreatlyelucidatedby

thepreliminaryinterpretationofrecentlyacquired

high-resolution3DseismiccoveringtheDEFarea.

Theresultsofthisreviewalreadyprovidevaluable

newinsightsintothepresenceanddistributionof

reservoir,sourceandcaprocks,andintothedeve-

lopmentofhydrocarbontraps,inparticularatLower

CarboniferousandDevonianlevels(TerBorghetal.,

EAGE2015).

Chalk leads

Zechstein-2 Carbonates leads

Dinantian Carbonates leads

Legend

Tectonic model for the Northern

offshore, DEFAB Area

47

4.3 Exploration activityIn2010,EBNpublishedacomparativeanalysisof

Dutchoffshoreexplorationactivitiesandthosein

theUKSouthernNorthSea(SNS)andDenmark.A

similaranalysisforthe2005-2014periodispresen-

tedhere.Germanywasnotincludedinthestudyas

offshorewellsareonlysporadicallydrilled.

Pleasenotethatthiscomparisonincludesonly

explorationwells,appraisalwellswereleftout.

Despitethesignificantscatter,itisobviousthatUK

SNSexplorationeffortsdecreasedconsiderably,

whereasthenumberofexplorationwellsinDenmark

andtheNetherlandsincreased.

North Sea area exploration eff ort

Dutch offshore UK Southern Gas Basin Danish offshore

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Nu

mb

er o

f exp

lora

tio

n w

ells

15

12

9

6

3

0

EBN2015

North Sea area off shore exploration eff ort

EBN2015

15

12

9

6

3

0

Nu

mb

er o

f exp

lora

tio

n w

ells

UK Southern Gas Basin Dutch offshore Danish offshore

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

48

Aprobablereasonfortheobserveddifferenceis

theUKwells’lackofsuccess:of48wellsdrilledin

theUKSNSinthisperiod,only14(29%)qualified

as'significantdiscoveries'(i.e.productiontests

yieldedmorethan400,000m3/d–DECCdefinition).

AlthoughtheDanishandDutchcriteriamaybeless

stringent,41%ofthewellsinDenmarkweresucces-

sful(9outof22),while58%oftheDutchoffshore

explorationwellsweresuccessful(41outof71)in

the2005-2014period.

SincealongtimeEBNadvocatesahigherlevelof

explorationdrillinginviewofthedisappearinginfra-

structure.Aftertheinfrastructurehasgone,much

potentialvaluemaynotberealisedasprospects

canthennolongerbedevelopedeconomically.Itis

apositivesignalthatthe2014explorationdrilling

activitycanbemarkedashighaswellasitispromi-

singthattheforecastfor2015isofacomparable

level.Itishowevertooearlytoclaimaturnaround

trend,especiallywhenconsideringthesteepdrop

inoilpriceandpotentialsubsequentbudgetcutsor

operationswaitingfortherigratetofalloff.

4.4 Forecasting risks and resources in exploration

Inexploration,Expectation(EXP)isdefinedasMean

SuccessVolume(MSV;beingthemeanrecoverable

volumeofhydrocarbonsintheprospect),multiplied

bytheProbabilityofSuccess(POS).

EXP = POS X MSV

Toputitsimply,ifwedrillfivewells,eachwitha

POSof20%,andallwiththesameMSV,weshould

strikeonesuccessfulwellthatfindsthatMSV.Overa

longerperiod,thisshouldholdtrue.Inanidealworld,

thetotalofthepredrillEXPofalldrilledprospects

shouldequalthetotalresourcesfound,i.e.successful

wellsshouldcompensatefordryholes.

Inthefollowinganalysis,wehaveusedaconversion

factorof1MMBO=0.174BCMofGE(Groningen

equivalentgasquality)foroilresources.Inreality,

thiswillobviouslydependonthequalityofboththe

oilandthegas.Ofthe101explorationwells(29

onshoreand72offshore)drilledbetween2005and

2014,32weredrilledtoaprimaryBuntertarget

and51toaRotliegendtarget.Theremaining18had

otherprimarytargets(Chalk,Jurassic,Zechsteinor

Success rate exploration wells

EBN2015

60

50

40

30

20

10

0

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

Nu

mb

er o

f wel

ls

Succ

ess

rate

(%)

Successfull wells Dry holes Success (%)

* Other = Carboniferous, Jurassic, Zechstein

Other* Bunter Rotliegend

51

3236

18

9

18

49

Carboniferous).Thesuccessratepertargetisshown

inthetable.

TheRotliegendisthemostimportantandmostsuc-

cessfulexplorationtarget.Thisisprobablyalsoattri-

butabletothefactthatalmost20%ofthewellsthat

drilledRotliegendtargetswerenear-fieldexploration

wells(i.e.drilledfromanexistingplatform).

Areviewofall101explorationwellsdrilledbetween

2005-2014yieldsanumberofinterestingconclu-

sions.Asanindustrywearerelativelysuccessful,

butwecoulddobetterinpredictingsuccess.The

averagePOSforall101prospectsdrilledwassome

52%,whereastheactualsuccessratewasover

63%.Inotherwords,weunderestimatedPOSby

over11%.ThisappliestonearlyallPOSclasses.It

shouldbenoted,however,thatthissuccessrateisa

technicalsuccessrate(i.e.apuffofgasissufficient).

Thecommercialsuccessrateofalldrilledprospects

isstillsome55%,assumingsomeofthemorerecent

discoverieswillbedevelopedintheforeseeable

future.This55%comparesrelativelywellwiththe

averagePOSof52%,butthelatterisalwaysusedas

theprobabilityoftechnicalsuccess.

Inthegraphbelowthedrilledprospectsaredistribu-

tedintoPOScategories.Thesuccessrateforeach

category(except41-50%)wasapproximately10%

higherthanpredicted.Forexample,theprobability

thataprospectwithaPOSof60%ormorewillfind

hydrocarbonsissome73-95%.

Average POS and success rate

EBN2015

90 %

80 %

70 %

60 %

50 %

40 %

30 %

20 %

10 %

0 %

24

21

18

15

12

9

6

3

0

PO

S &

su

cces

s ra

te (%

)

Nu

mb

er o

f exp

lora

tio

n w

ells

Successfull wells Dry holes Success rate/yearAvg POS/year Success rate all 101 wells

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

50

UnderestimatingthePOSwillleadtoanunderes-

timationoftheExpectationvolume(EXP=POS

XMSV).Givenapopulationofsufficientsize(and

101shouldqualify),allwellscombined(dryand

successful)shouldfindthesumoftheirrespective

EXPs.Unfortunately,theresultsarelesspositiveand

considerablylessisactuallyfound.

Astothepossiblecausesofthisdiscrepancy,errors

indepthpredictionprobablyplayanimportantrole.

Ofallwells,some60%findthereservoirwithin

approximately25mofthepredrilldepthprediction;

inotherwords,40%donot.Thiswasalsopointed

outintheFocus2012report.Forsomewells,the

errorsindepthpredictionwereevenhundredsof

metres.AcomparisonoftheresultsofBunterwells

(32)andRotliegendwells(51)showsthatthedepth

Postdrill success rate vs predrill POS

EBN2015

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

Po

std

rill

succ

ess

rate

Predrill POS

Numbers refer to total number of wells Average success rate (63.4%)

1-10% 11-20% 21-30% 31-40% 41-50% 51-60% 61-70% 71-80% 81-90% 91-99%

112

15

1211

10

17

175

0

1

Triassic Bunter depth vs depth predictions

EBN2015

Rotliegend depth vs depth predictions

Rotliegend deep

Rotliegend shallow

Rotliegend OK (+/- 25 m)

8%

59%

33%

Bunter deep

Bunter shallow

Bunter OK (+/- 25 m)

22%

63%16%

51

predictionsforbothareroughly60%accurate.

Surprisingly,sevenoftheBunterwellscamein

shallow(twoevenbymorethan80m).Onethird

oftheRotliegendwellscameintoodeep,whichis

probablyduetoT/Dconversionuncertaintiescaused

byoverlyingsaltdiapirs.

Incorrectdepthpredictionsmayaffectthegas

columnandhencevolumetrics(iftheGWCisas

expected),aswellasfaultjuxtapositionsandpossibly

reservoirquality.

Thesuccessrateforall101wells(alltargets)was

63%.Ifthetargetdepthwaspredictedcorrectly(i.e.

within+/-25m),thesuccessratewouldincrease

to75%.Thiscompareswitharelativelypoor48%

successrateforthe40wellsoutsidethe+/-25m

depth-predictionbracket.Acorrectdepthprediction

notonlyresultsinahighersuccessrate,butalsoin

thesumoftheEXPforall'correct'prospectsbeing

muchclosertotheactualpost-drillvolumesfound-

unfortunatelyactualsaresmallerthanhopedfor.

Inconclusion,asanindustryweunderestimatePOS

andoverestimateMSV.

4.5 Shallow gas opportunitiesTheNorthernDutchOffshorehostsplentyofampli-

tudeanomaliesorbrightspotsintheTertiarywhich

caneasilybeidentifiedonseismic.Theseanomalies

mayberelatedtothepresenceofhydrocarbonsand

typicallyoccurabovetheMid-Mioceneunconformity

atdepthslessthan1000m.Four-way-dipclosures,

fault-relatedstructuresandstratigraphictrapshave

52

allbeenobserved.Thereservoirsaregenerallythin

sandylayerswithgoodporosityandpermeability.

Stacked,multiplebrightspotsabovesaltdomesare

frequentlyobserved.

Whileshallowgaswaslongconsideredeithera

drillinghazardorchallengingtodevelopbecauseof

thelowpressureandunconsolidatednatureofthe

reservoirs,theplayhasnowbecomeasuccessful

partoftheDutchhydrocarbonsystem.Withthree

producingfieldsandafourthfieldcomingonstream

in2016,shallowgashasproventobeavaluable

resource.Developmentoffouradditionalfieldsis

underconsideration.Sincethefirstfieldstartedpro-

ducingin2007,almost8BCMhasbeenproduced

fromthreefields,mainlybyhorizontalwellswith

effectivesandcontrolmeasuressuchasexpandable

sandscreensorgravelpacks.

4.5.1 Shallow gas portfolio

Thesuccessesoftheproducingfieldsandin-place

volumeestimatesareencouraging.TheNorthern

Offshoreisnowlargelycoveredby3Dseismic,

includingamulti-clientsurveyshotbyFugroin

2010/2011.Manyadditional2Dlinesarealso

available.Intheseseismicdata,EBNhasidentified

over150brightspotsrangingupto60km2insize.

Shallowgasisalsoknowntooccuronshore,although

thefocusiscurrentlyontheoffshorepotential.

Whilebrighteninginshallowreflectorsmayindicate

thepresenceofgas,itcouldalsoberelatedto

uneconomicamountsofhydrocarbonsdueto

thenon-linearbehaviourofseismicvelocitywith

saturation.Lithologicaleffectscouldalsoplaya

role.Furthermore,notmanybrightspotshavebeen

drilled,andtheuncertaintyrangesarelarge.

Inordertofurtherassessthepotentialoftheplay,

EBNhasdevelopedasemi-quantitativeseismic

characterisationsystemthatdescribeseach

individualanomalywithrespecttosizeanddirect

hydrocarbonindicators(DHIs)suchasflatspots

andvelocitypull-downeffects.Adetailedsubsur-

faceanalysis,includingavolumetricassessment,

isdoneforthehighest-rankingleads.Thissystem

hasidentifiedmorethan20amplitudeanomaliesas

prospectiveshallowleads,withindividualin-place

volumeestimatesofupto2.5BCM.

Oneofthehigh-rankingamplitudeanomaliesinopen

acreageisleadF04/F05-P1,whichisnowcovered

by3Dseismic.Itshowsseveralreflectorsthat

displaybothamplitudereversalandbrighteningin

afour-way-dipclosure,cutbyfaults.Evenstron-

gerindicationsforhydrocarbonsarethevelocity

pull-downandamplitude-dimmingeffectsbelow

thebrightreflectors.Assumingthreegas-bearing

reservoirsarepresent,theestimatedGIIPrangeis

1.2-1.5-1.9BCM(P90-mean-P10)inafill-to-spill

case.Theveryflatnatureofthetrapisrepresented

bythelowGIIPrangewhen10munderfilltospill

pointisassumed:thiswouldreducetheGIIPrange

to0.2-0.3-0.4BCM(P90-mean-P10).Thefigure

belowshowsthatthefill-to-spillscenariodoesnot

correspondwiththeoutlineoftheamplitudeano-

maly.Whenassumingthefullareaoftheamplitude

tobegas-filled,themeanGIIPincreasesto3.5BCM;

thishowever,requiresoverfillofthemappedfour-

waydipclosure.

Theleadwasdrilledin1982bywellF05-02

targetingCretaceousandTriassiclevels.Althoughno

specificattentionwaspaidtotheTertiaryinterval,

gasreadingsof12%wererecordedattheinterval

correspondingtothedeepesttwobrightlevels.With

trapandchargeevidentlypresent,absenceofreser-

53

voirrepresentsthehighestrisk.Gamma-rayAPI

levelssuggestsiltysandsatbest,whilenodistinct

sand-bearingintervalswererecognisedonthemud

logs.However,withabasecaseGIIPestimateof

1.48BCM,furtherexplorationofthisTertiarytarget

isjustifiable.

4.5.2 Economics of shallow gas leads

Thevolumerangesoftheseleadsarelargebecause

oftheuncertaintyofgassaturationandother

reservoirparameters.Estimatedvolumesofmost

oftheleadsarebelow2BCMGIIP;inmanycases,

existinginfrastructureisalsorelativelydistant.This

promptsthequestionofhowthesereservoirscan

bedevelopedeconomically.In2014,EBNstudied

F05-02 F05-02-800

-800-800

-800

-800

-800

-800

-800

-800

-800

-800

586000 588000 590000

586000 588000 590000

6062

000

6064

000

6066

000

6068

000

6070

000

6072

000

60620006064000

60660006068000

60700006072000

Geographic datumGCS_European_1950

ProjectionED50-UTM31

10 m underfill586000 588000 590000

586000 588000 590000

6062

000

6064

000

6066

000

6068

000

6070

000

6072

000

60620006064000

60660006068000

60700006072000

Fill to spill586000 588000 590000

586000 588000 590000

6062

000

6064

000

6066

000

6068

000

6070

000

6072

000

60620006064000

60660006068000

60700006072000

Fill to amplitude anomaly

F04/F05-P1 GIIP range for diff erent scenarios

EBN2015

10 m underfi ll

fi ll to spill

fi ll to anomaly

0 1 2 3 4 5

mid high

low mid high

low

54

theeconomicpotentialoftheplayinafirst-order

approach.Theplotshowsthebreak-evenCAPEX

curveinrelationtopipelinedistanceandrecoverable

volumesbasedonconventionalexpenditureprofiles.

Theassumptionwasmadethatstand-alonedevelop-

mentoftheleadswithsatelliteplatformsconnected

tothenearestpotentialhostplatformwouldbe

feasible.Thetaxincentiveapplicabletomarginal

fieldsintheNetherlandswasalsotakenintoaccount.

Forarealisticrangeofpipelinedistancesinthe

studyarea,thebreak-evenvolumesrangefrom1to

1.2BCM.Theleadsthatrankhighestintheabove

seismiccharacterisationsystemareindicatedinthe

plot;thisshowsthattherearefourleadsthatcould

bedevelopedeconomicallyasstand-aloneprojects,

basedonconservativecostestimates.Twoofthese

aresituatedinopenacreage.Thesepromising

resultsjustifyfurtherstudyofthedevelopment

potentialoftheplay.

Obviously,thecommercialityoftheplaywillgreatly

increaseifCAPEXandOPEXarereduced.EBN

hasinvestigatedplatformcostsasafirststepin

assessingcostreductionsforshallowgasandother

marginaldevelopments.Studyresultsshowthat

currentcostscanbereducedby50%,asdescribedin

section3.2.Onthebasisoftheseresults,theecono-

micbreak-evenprofileshiftstotheleftandseveral

additionalleadsbecomeeconomic.Additionalcost

reductionswillbeinvestigatedinfollow-upprojects,

includingacost-efficientexplorationcampaign.

Economicswouldclearlyalsobenefitfromcluster

developmentofseveralshallowandother(deeper)

accumulations.EBNwillthereforeconductadetailed

economicanalysisforaspecific,high-rankingareain

theNorthernDutchOffshorein2015.

EBNisencouragingfurtherexplorationoftheshal-

lowplayinviewofthesuccessofthreeproducing

shallowfieldsoffshoretheNetherlands,thewide

availabilityof3Dseismicdatashowingnumerous

additionalleadsandtheeconomicprospectivityof

severalofthoseleads.

EBN2015

Economic screening of shallow gas portiolio

0

10

20

30

40

50

60

Shallow leads (under concession) Shallow leads (open acreage) Econ. cut- off UR [BCM]

0 0,5 1 1,5 2 2,5 3

Pip

elin

e d

ista

nce

[km

]

Pipeline distance to nearest host platform against ultimately recoverable volumes (UR) for all the fields and the highest ranking

leads and prospects of the shallow gas portfolio. Volume uncertainties are indicated by error bars. The blue line represents the

break-even distance-volume profile, e.g. data points to the right of the line would be economic as stand-alone projects.

55

Glossary

56

AOC Agreementofcooperation

BARMM Degreeongeneralrulesonenviron-

mentandmining

BAU Businessasusualscenario:forecast

scenarioassumingtheE&Pindustry

maintainsitscurrentactivitylevel

BCM BillionCubicMeters

BOON BenchmarkingOpexOffshore

Netherlands

CA Cooperationagreement

CAPEX Capitalexpenditure

CGIIP Connectedgasinitiallyinplace

COP Cessationofproductiondate

CRF Connectedrecoveryfactor

DEFAB ExplorationstudyoftheD,E.F,A

andBblocks

DHI Directhydrocarbonindicator

EAGE EuropeanAssociationofGeo-

scientist&Engineers

EBIT Earningsbeforeinterestandtax

EIA Environmentalimpactassessment

E&P ExplorationandProduction

EOFL EndofFieldLife

EXP Expectation

GE GroningenEquivalent

G&G Geology&Geophysics

GIIP GasInitiallyinplace

GTL Syntheticdieselfuelmanufactured

fromnaturalgas

HP/HT Highpressure/hightemperature

JIP JointIndustryProject

MA MiningAct

MFTA MarginalFieldTaxAllowance

MSV MeanSuccessVolume

Operator PartycarryingoutE&Pactivities

inalicenceonbehalfofpartners

OPEX Operationalexpenditure

POS ProbabilityofSuccess:theproba-

bilityoffindinghydrocarbonsina

prospect

PRMS PetroleumResourcesManagement

System:internationalclassification

systemdescribingthestatus,the

uncertaintyandvolumesofoil

andgasresources,SPE2007with

guidelinesupdatedin2011

RF Recoveryfactor

RIL ReinvestmentLevel

ROCE Returnoncapitalemployed,the

profitabilityoflongtermE&P

investments

ROIC Returnoninvestedcapital

Shale gas Gasheldintightreservoirsinshales

withinsufficientpermeabilityforthe

gastoflownaturallyineconomic

quantitiestothewellbore

Small fields AllgasfieldsexcepttheGroningen

field

SodM StatesupervisionofMines

SPE SocietyofPetroleumEngineers

SPS StateProfitShare

Tight gas Gasinreservoirswithinsufficient

permeabilityforthegastoflow

naturallyineconomicratestothe

wellbore

TKI TopconsortiumforKnowledge

andInnovation

TNO NetherlandsOrganizationfor

AppliedScientificResearch

TWT TwoWayTime

UR Ultimaterecovery

UOP Unitofproduction

Velocity string Asmall-diametertubingstringrun

insidetheproductiontubingofa

wellasaremedialtreatmentto

resolveliquid-loadingproblems

Wabo EnvironmentallicensingBill

57

About EBN

Based in Utrecht, EBN B.V. is active in exploration,

production storage and trading in natural gas and

oil and is the number one partner for oil and gas

companies in the Netherlands.

58

Togetherwithnationalandinternationaloiland

gascompanies,EBNinvestsintheexplorationfor

andproductionofoilandnaturalgas,aswellasgas

storagefacilitiesintheNetherlands.Theinterestin

theseactivitiesamountstobetween40%to50%.

EBNalsoadvisestheDutchgovernmentonthe

miningregimeandonnewopportunitiesformaking

useoftheDutchsubsurface.

Nationalandinternationaloilandgascompanies,

licenceholders,taketheinitiativeintheareaof

development,explorationandproductionofgasand

oil.EBNinvests,facilitatesandsharesknowledge.

Inadditiontointerestsinoilandgasactivities,EBN

hasinterestsinoffshoregascollectionpipelines,

onshoreundergroundgasstorageanda40%inte-

restingastradingcompanyGasTerraB.V.

Theprofitsgeneratedbytheseactivitiesarepaidin

fulltotheDutchState,representedbytheministry

ofEconomicAffairs,oursoleshareholder.

Visitwww.ebn.nlformoreinformation.

References

• BenchmarkOpexOffshoreNederland,

BOON-2012.EBN.

• Kreft,E.,Godderij,R.,Scheffers.,B.,EBN.

SPE-ATCE2014.SPE170885,Thevaluesadded

offiveyearsSPE-PRMS.

• Jaarsma,B.,Schneider,J.,Tolsma,S.,Lutgert,

J.[2014]AnewchancefortheZechstein-2

CarbonateplayintheMidNorthSeaHigharea?

EAGEextendedabstract,2014

• PWC,November2013.Drivingvalueinupstream

Oil&Gas,lessonsfromtheenergyindustry’stop

performingcompanies.

• TerBorgh,M.,M.,Jaarsma,B.,Rosendaal,E.A.,

[2015].GoNorth–afreshlookatthePaleozoic

structuralframeworkandhydrocarboncharge

intheDutchnorthernoffshore.EAGEextended

abstract2015.

Acknowledgement

FocusonDutchOilandGas2015wasmadepossi-

blebythesupportofseveralorganisations,including

TAQAenergyB.V.(photopage21),Nederlandse

AardolieMaatschappijB.V.(photopage23and26),

GDFSUEZE&PNederlandB.V.(photopage25),

Scaldis(photopage36),WintershallNoordzeeB.V.

(photopage41),IV(picturepage37)andFUGRO

(picturespage47and54).Theirinputwasofgreat

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