Maersk Oil has production in Denmark, Qatar, Great Britain, Algeria and Kazakhstan. The company also conducts exploration activities in these countries as well as in other areas such as Angola, Brazil, Norway, Oman and the Gulf of Mexico.
The company recently purchased Devon Energy’s 25% interest in the Jack prospect in the Gulf of Mexico, and it holds interests in additional Gulf acreage. Morten Kelstrup, Vice President and Head of Strategy and Economics for Maersk Oil & Gas, discusses the company’s E&P strategy in the Gulf and elsewhere. He also discusses various technical solutions to increase production in the company’s European projects, including long-reach horizontal wells and CO2 injection to both increase production and reduce CO2 emissions.
World Oil: Will Maersk continue to seek purchase opportunities similar to the acquisition of Devon Energy’s interests in the Jack development project in the US Gulf of Mexico?
Morten Kelstrup: The Gulf of Mexico is a focus area for Maersk Oil. With the acquisition of Devon’s interest in the Jack development project and our interest in the Buckskin discovery, we have some exciting activities going on which fit well into our deepwater strategy. We are still looking for new opportunities in the area, both as an operator and a non-operator.
In addition to the newly acquired interest in the Jack development project and the appraisal activities in the Buckskin discovery in the Central Gulf of Mexico, we also have interests in a number of exploration leases in the Central and Western Gulf of Mexico. We consider the US Gulf an important growth area for us, so we are looking to do more business here.
We are currently looking at the opportunities in the Gulf of Mexico, and, if the right opportunities arise, we will most certainly pursue them. We are part of the AP Moller-Maersk Group, and we have a strong financial base to make new long-term investments.
WO: What are the challenges you might encounter exploring and producing in the deepwater US Gulf?
Kelstrup: Many of the challenges are, of course, similar to other areas of E&P evolving around a proper understanding of the reservoirs. Costs are always a concern—amplified by the relatively long time from initial discovery to first production. But with our integrated technical solutions and project management skills, we believe that we can manage this and add value as a deepwater partner and operator and, thereby, also prevail in the rather fierce competition in the Gulf.
In this aspect, we also expect to draw on our experience as a deepwater operator in Angola, where we are busy appraising our Chissonga discovery from 2009.
WO: What are some of the important E&P projects ongoing or scheduled for the North Sea during the next few years?
Kelstrup: Maersk Oil is active in Denmark, the UK as well as in Norway. In the UK, we have made several significant discoveries, such as Culzean, Golden Eagle, Pink, Hobby and Flyndre. We plan to commence the drilling of two appraisal wells at Culzean during 2010. Further, we are working to establish a combined field development plan for Golden Eagle, Hobby and Pink to be ready by the end of 2010, and we expect a development plan for Flyndre in a year. So we are quite busy here.
In Denmark, the main challenge is to reduce the natural production decline from this mature region. Through our technical and operational capabilities we have managed to raise the recovery rate to more than 30% in some of these tight chalk fields. And we intend to try to push this even further. We are consistently looking at new innovative solutions that can improve our recovery rate. We expect to produce oil here for many years to come.
In Norway, we acquired a 70% share in license PL431, including the T-Rex discovery. Our aim here is to add production activities to the current exploration activities. In total, we have interests in some 10 Norwegian exploration licenses. We clearly see Norway as a growth area for us supported, among others, by the skills we bring from enhancing recovery from the Danish chalk.
In general, we see plenty of opportunities in the North Sea—both organic and non-organic.
WO: Is Maersk experiencing a decline in its North Sea oil and gas production rates, and what is being done to mitigate that problem?
Kelstrup: Some of our fields in Denmark have been producing for more than 30 years now, and we are now experiencing a natural decline in production rates from this mature area. But we are working hard to reduce the decline and prolong the economic life of these fields—for example, through advanced stimulation and completion techniques as well as investigating the potential for enhancing oil recovery through CO2 injection.
We have, for instance, signed an agreement with Finnish utilities Fortum and Teollisuuden Voima [TVO] to initiate a pre-study to provide CO2 for testing of CO2 injection in the DUC [Danish Underground Consortium] fields. We are still in the early stages, and many political and financial pieces have to fall into place before carbon capture and sequestration and CO2 injection in large scale can be a reality. We believe, however, that the technology has the potential to prolong the life of the mature fields as well as be a solution to reduce CO2 emissions.
WO: The main part of Maersk Oil’s operated production in the North Sea and in Qatar is from low-permeability, high-porosity chalk and limestone reservoirs. Application of advanced seismic processing techniques, ultra-long horizontal drilling (up to 12 km) and Maersk Oil’s completion and stimulation technology applied to those horizontal wells have been the key to the technical success in developing these chalk fields.
Would these technologies be applicable in the US Gulf and other regions where Maersk is active?
Kelstrup: Our experiences and capabilities gained in the North Sea originally qualified us for doing business in Qatar. Over the years, we have further developed our advanced seismic processing techniques, ultra-long horizontal drilling, and completion and stimulation technology of the horizontal wells, significantly improving our recovery rate of hydrocarbons. Moving ahead, we are also focusing on deepwater activities, for example, in Angola and the US Gulf of Mexico, where our gained expertise will be essential in combination with the specific deepwater competencies which we currently are building up. 
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THE AUTHORS
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Morten Kelstrup is Vice President and Head of Strategy and Economics for Maersk Oil & Gas. Prior to being promoted to his present position in 2007, he was Director and Head of the Commercial Department from 2001 to 2007. Mr. Kelstrup joined Maersk in 1998 as a Sales Manager in the Commercial Department. Prior to joining Maersk Oil & Gas, he was a Business Development Manager for Texaco Gas and Power in London and Houston from 1997 to 1998. Mr. Kelstrup was employed by Danish Oil and Natural Gas (DONG) in Denmark from 1992 to 1997. He earned a bachelor’s degree and a master’s degree in economics and business administration in 1990 and in 1992, respectively, from Aarhus Business School in Denmark. He received an MBA degree from the University of Chicago Graduate School of Business in 2008.
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