Declining interest in the Dreki area

Ithaca Energy, along with its partners Icelandic Kolvetni/Eykon and Norwegian Petoro, have relinquished their hydrocarbon exploration- and production licence, which was issued by the Icelandic National Energy Authority (NEA) in 2013.

The license is is one of three licenses that the NEA has issued for for exploration and production of hydrocarbons in the Dreki Area, on the continental shelf north of Iceland. The first license was handed in already by December 2014, so now there is only one active hydrocarbon license on the Icelandic continental shelf.

According to a press release by the NEA, the holders of the license now being relinquished “acquired more than 1,000 km of 2D seismic in the summer of 2016. Based on interpretation of the data the operator concluded that the results of the completed exploration work in the 1st sub-period of the licence did not merit the continuation of exploration into the 2nd sub-period.” Geological studies based on the new seismic data indicate that the probability of finding oil and/or gas in commercial quantities in the selected focus area within their licence does not sufficiently support committing to the next phase in the work program.

The interpretation by Ithaca Petroleum suggests that there is more fracturing in their area of interest than had been initially considered. The potential source rocks are also deeper in the crust than anticipated, diminishing the chances of oil formation. Thus, the license has been handed in.

According to the NEA, the geological setting of this licence-area is different from the area of the only remaining licence, which was granted in 2014 and has Chinese CNOOC as operator. However, it is still unclear if CNOOC will make any drilling in the area. In 2015, 2D seismic data was acquired, and possible acquisition of 3D seismic for selected parts of the licence area is expected to take place 2018. If the results of 3D seismic acquisition calls for further exploration, an exploration well may be drilled in the time period 2022-2026.

So far, is is uncertain whether hydrocarbons can be found in the Dreki Area and if so if it will be in commercial quantities. In the case of potential oil production in the area, the NEA expects it could take ten years until first oil following a discovery.