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Statoil Targets More North Sea Finds After ‘Fantastic’ Year

October 14, 2011

(Updates with replacement ratio in seventh paragraph.)

Oct. 14 (Bloomberg) -- Statoil ASA is targeting more prospects in the North Sea after the Aldous-Avaldsnes oil find revived interest in the area and strengthened the company’s goal of keeping output at current levels until 2020.

“From an exploration perspective, 2011 has been a fantastic year,” Oeystein Michelsen, head of development and production in Norway, said yesterday on a platform at the North Sea Troll field. “Despite it being a mature area, we still see a lot of possibilities in the North Sea. It will deliver steady, high production.”

Statoil and Lundin Petroleum AB this year struck oil at the Aldous and Avaldsnes prospects in the North Sea, which together may hold as much as 2.6 billion barrels, the third-biggest oil find off Norway in more than 40 years of exploration. The country’s Petroleum Directorate estimated this week that resource growth is likely to outstrip production for the first time since 1997.

The Aldous-Avaldsnes discovery will help Statoil in its plans to add 700,000 barrels of oil equivalent a day in new production by 2020 to keep domestic output at 1.4 million barrels of oil equivalent a day. Gas will take a bigger share than today’s 50 percent, Michelsen said in an interview at Troll, off Bergen.

Lot of Prospect

“We plan to maximize the value of the North Sea and still see a lot of prospects, such as in the Oseberg area,” he said. Government-owned Statoil, which operates about 80 percent of Norway’s petroleum production, is investing 17 billion kroner ($3 billion) in four rigs and two compressors at the Troll field to boost output, after spending 6 billion kroner on a new pipeline and expanding facilities, Michelsen said.

Oil production for the seventh-largest crude exporter has dropped 50 percent in the past 10 years as North Sea fields such as Troll, Norway’s biggest gas deposit, mature and discoveries have become smaller. Gas production in Norway, which is less profitable, has doubled in the past decade.

Statoil is expanding in countries such as Angola, Brazil and the U.S. as in a bid to increase production and replace its reserves. While the company raised its replacement ratio to 87 percent in 2010 from 73 percent in 2009, it hasn’t been above 100 percent since 2004.

The North Sea “is undoubtedly an area where everybody has started looking at the seismic data again, wondering what they’ve missed,” Bente Nyland, head of the directorate, said at an Oct. 12 press conference in Stavanger.

Troll Output

Statoil expects to maintain gas output from Troll at current levels until 2030 and keep overall production going until 2060, recovering an estimated 6.5 billion barrels of oil equivalents, Michelsen said. Troll is also Norway’s third- biggest oil producer.

Statoil is investing in modifications on its installations off Norway to reduce the maintenance halt interval to every third year from every other year now, Michelsen said. The company expects to maintain spending levels on maintenance and upgrades at its platforms, which amounted to 10 percent of investments this year, he said.

“We don’t see investments galloping going forward -- they’ll remain at a solid, responsible level,” Michelsen said. “To the extent that we increase investments, that share may be somewhat less.”

While finds farther north in the Norwegian Sea have been disappointing in the past years, with prospects such as Dalsnuten, Gro and Victoria coming in at the lower end of early estimates, the Barents Sea is emerging as a “new industrial horizon,” Michelsen said.

Goliat Start

Eni SpA’s Goliat field, in which Statoil owns 35 percent, is scheduled to start production in 2014. Statoil is targeting a record development time of less than six years at the Skrugard find, which is estimated to contain 250 million to 500 million barrels, and will next year make a decision on investing in a second liquefied natural gas plant at Melkoeya, the onshore production facility near Snohvit.

“The probability of finding a profitable solution to this is good,” said Michelsen. Building a pipeline to the Barents Sea, which is being assessed by Norwegian authorities, “would require huge investments and large resources,” he said.

GDF Suez SA today reported that it had drilled a dry well in the Barents Sea, the third failed well this year in the sea off Norway’s northern tip. Three other wells found resources, including the Skrugard deposit.

Statoil also has “very big expectations” for the newly delimited area in the southeastern Barents Sea along the border with Russia, Michelsen said. OAO Lukoil’s Chief Executive Officer Vagit Alekperov last month said the company was interested in working with Statoil in the area.

Michelsen declined to comment on whether the company was in talks with Lukoil. “There are a lot of discussions on collaboration in the Barents Sea between just about all the companies,” he said.

--Editors: Jonas Bergman, Randall Hackley

To contact the reporter on this story: Marianne Stigset in Oslo at mstigset@bloomberg.net

To contact the editor responsible for this story: Will Kennedy at wkennedy3@bloomberg.net


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