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STATOIL-SAGA COMBINE EYES DEVELOPMENT OF NORWEGIAN SEA GAS FIELDS

Oct. 31, 1994

Norway's Den norske stats oljeselskap AS and Saga Petroleum AS have signed an agreement setting out a plan for joint development of Midgard and Smorbukk gas fields in the Norwegian Sea. The agreement involves Saga relinquishing operatorship of Midgard in return for a stake in development of Smorbukk and South Smorbukk fields. Statoil will then act as operator for combined development of Midgard and Smorbukk. While the deal is unusual for Norway, it has the backing of Energy Minister Jens

Norway's Den norske stats oljeselskap AS and Saga Petroleum AS have signed an agreement setting out a plan for joint development of Midgard and Smorbukk gas fields in the Norwegian Sea.

The agreement involves Saga relinquishing operatorship of Midgard in return for a stake in development of Smorbukk and South Smorbukk fields. Statoil will then act as operator for combined development of Midgard and Smorbukk.

While the deal is unusual for Norway, it has the backing of Energy Minister Jens Stoltenberg, who is keen to start exploiting untapped gas resources off Central Norway.

Although full details of the Statoil-Saga deal were not disclosed, it is believed the companies want to push development of the fields to secure a share of current gas supply contracts with Europe.

"Timing is crucial," said a Saga official. "If we miss the train of gas allocations under existing contracts, it could be 10 years before the next train leaves the platform."

SAVINGS, RESERVES

Norway's authorities were said to have encouraged Statoil and Saga to enter the deal. A ministry official said the exact quantity of Saga's share in Smorbukk had yet to be settled, but it would come from the state interest.

The official said 6-7 billion kroner ($920 million-1.07 billion) can be saved in joint development of the two fields. Joint development is expected to cost 40 billion kroner ($6.1 billion).

Midgard, Smorbukk, and South Smorbukk were considered as only bordering on commercial viability before the agreement.

Midgard field lies in Blocks 6507/2 and 6507/11. Field reserves are estimated by Norwegian Petroleum Directorate (NPD) at 3 tcf of gas, 8 million bbl of crude oil, and 110 million bbl of condensate.

Smorbukk and South Smorbukk lie largely in Block 6506/11. Statoil estimates Smorbukk reserves at 3.3 tcf of gas and 37 million cu m of condensate. South Smorbukk reserves are estimated at 700 bcf of gas and 150 million bbl of oil.

Wood Mackenzie Consultants Ltd., Edinburgh, says Smorbukk will be developed as a gas gathering center for the three fields, going on stream in 1999.

Midgard and South Smorbukk are expected by Wood Mackenzie to be developed as subsea fields tied back to Smorbukk, starting up in 2000 and 2002, respectively.