While the drilling encountered gas condensate and sandstone reservoirs, the quality of the rocks varied and the commercial potential is still being evaluated, BP partner Faroe Petroleum Plc (FPM) said today in a statement. The well may have cost at least $200 million to drill, based on the rate of the Stella Carron drillship when Chevron used it in Norway in 2010.
“It had to be an expensive well but we have no idea what it cost and no idea what they’ve found,” Brian Gallagher, an oil and gas analyst at Investec Securities Ltd., said in London. “That doesn’t look encouraging. The main takeaway is that more work needs to be done.”
The drilling illustrates the risks resulting from BP Chief Executive Officer Bob Dudley’s push for increased exploration in frontier areas, and the industry’s reliance on new resources, as established fields age, that are harder to find and develop. The search for new finds adds to costs, with the rate for Stella Carron deployed at North Uist more than $500,000 a day.
Faroe Petroleum fell 2.1 percent to 138 pence by 10:04 a.m. in London after dropping as much as 5.5 percent to the lowest since Jan. 31. BP fell less than 0.1 percent to 451.80 pence.
The North Uist well was drilled to 4,700 meters (15,000 feet). It started under about 1,300 meters of water, making it one of the deepest water wells in British oil exploration.
“The geological data collected in the well will be subject to detailed evaluation in the coming months,” Robert Wine, a BP spokesman, said by e-mail. Drilling started on March 25, 2012.
BP owns 47.5 percent of North Uist, Nexen Inc. (NXY) 35 percent, and Faroe 6.25 percent. The rest is held by Cieco Exploration and Production U.K. Ltd. and Idemitsu Petroleum U.K. Ltd.
“We are pleased to have made a discovery in the North Uist exploration well, although we had however hoped for better quality reservoir,” Faroe Petroleum CEO Graham Stewart said in the statement. “The result proves another working hydrocarbon system in the frontier west of Shetlands which is good news for further prospectivity in these U.K. waters.”
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