Statoil Gets Consent for North Sea development
BY KJETIL MALKENES HOVLAND
OSLO -- Norwegian oil company Statoil Friday received consent from the U.K. government to go ahead with a new $7 billion North Sea oil development, the largest investment for more than a decade in an industry that has become an increasingly important driver of U.K. economic growth.
The Statoil project will tap a heavy oil field called Mariner that was discovered in the 1980s, but until now couldn't be brought to production because of unresolved technical challenges.
Statoil expects to pump 250 million boepd of oil in total from Mariner, said the company's Chief Executive Officer Helge Lund. First production is planned for 2017 and it will maintain plateau production of 55,000 boepd of oil until 2020, he said.
The investment in the field was hailed by the U.K. government as good news for an economy that remains in the doldrums. North Sea oil and gas have become a crucial driver of growth after many other parts of the economy, such as banking, were severely weakened by the economic downturn.
"We've been trying to get the Mariner project going for 30 years. It's taken Norwegian ingenuity to deal with the complexity of the oil and gas in that field," said Ed Davey, the U.K. government's Energy and Climate Change Secretary.
The investment could benefit many oil and gas supply chain companies, he said. "There are lots of jobs in the fabrication and other sectors that support such investments. I want to see as many [as possible] U.K. and Norwegian citizens being engaged in the investments that flow from the North Sea."
The shutdown of the U.K.'s largest oil field, Buzzard, was a major reason for the 0.3% contraction the U.K. gross domestic product between October and December, according to the Office for National Statistics. The timing of the restart of Total SA's Elgin-Franklin gas field this quarter could be an important factor in determining whether the country's economy enters its third recession in five years.
Extractive businesses, the bulk of it oil and gas, contribute 2.4% of the total U.K. gross domestic product, the ONS said.
"It's a major investment, and I think it will create significant ripple effects, also in the U.K. economy," Mr. Lund said. "We estimate that in Aberdeen only, there will be the operational organization with around 600 to 700 permanent employees, and a significant part of the acquisition and the project will be also covered by suppliers in the U.K."
Statoil is already planning its next U.K. heavy oil field, Bressay, expecting to make an investment decision later this year.
Tax incentives for oil fields offered by the U.K. government positively influenced the decision to proceed with the Mariner project, Statoil said. The U.K offers these incentives to boost oil output from aging fields, Mr. Davey said.
The Mariner field, "demonstrates how the combination of technology and the right regulatory regime can unlock investment in the U.K.'s oil and gas assets," said Adam Lyons, director of oil and gas at PricewaterhouseCoopers.
Statoil will draw on previous experience from heavy oil fields to extract Mariner's extra-heavy crude, which is far harder to extract than traditional light North Sea oil, Mr. Lund said. "We have done Grane in Norway, which is a heavy oil field, we have done Peregrino very successfully for the last two years in Brazil, so this is a natural extension for us," he said.