Snøhvit group: gas field's oil uneconomic

Jan. 18, 2007
Developing associated oil from the Snøhvit field in the Barents Sea is uneconomic, the Snøhvit consortium has agreed, and so it will focus solely on natural gas production.

Uchenna Izundu
International Editor

LONDON, Jan. 18 -- Developing associated oil from the Snøhvit field in the Barents Sea is uneconomic, the Snøhvit consortium has agreed, and so it will focus solely on natural gas production.

Project operator Statoil ASA said the partners last summer revisited oil production in the Barents Sea, which is a technically challenging area in icy waters, because they had new reservoir knowledge, technological advancements, and the Norwegian government's overall management plan for the Lofoten area.

A Statoil spokesman told OGJ the consortium had estimated a cost of 8 billion kroner to develop the oil, but declined to state the oil prices used within that development scenario. The partners originally had planned to drill a well in Snøhvit this May, he said, and then refine the development concept after looking at the well results. "But the evidence now to date showed that it didn't make any sense to commit to drilling a well because it would be uneconomic to develop Snøhvit oil," he added.

Gas production from Snøhvit, to be exported as LNG to the US, is expected to begin in late 2007. Oil production would have been further complicated by the need for a tight timetable for oil to come on stream by 2010 and produce until 2014 before the pressure in the reservoir becomes too low, he said.

Geir Pettersen, senior vice-president for Statoil's Tromsø Patch business cluster, which includes Snøhvit, said: "Even if current studies did support an economic development case, for such a timetable to be met, we would need to enter into binding agreements with suppliers as early as this year and before the technical foundation for a development was in place. In current market conditions, this would result in greater uncertainty surrounding the actual development costs and would not be commercially advisable."

Statoil, however, said it has not ruled out reexamining the issue in the future if there are advanced technological improvements.

Statoil holds a 33.53% share in Snøhvit. Other licensees are Petoro AS 30%, Total SA 18.4%, Gaz de France 12%, Hess 3.26%, and RWE DEA AG 2.81%.

Contact Uchenna Izundu at [email protected].