Friday 21 October 2011
Statoil, whose shares jumped 3 percent on the news, said
part of a newly discovered North Sea oil field was twice as big as previously
thought, bringing the overall dimensions to as much as 3.3 billion
Statoil's executive vice president for exploration, Tim
Dodson, said the newly upgraded oil reservoir might turn out 800,000 barrels
per day (bpd), a level equal to OPEC member Qatar's oil output.
The scale of the Aldous/Avaldsnes find has surprised the
oil industry as many considered the North Sea's major resources to have been
pumped out, and it promises billions in future income for Norway and field
partners including Statoil.
"It's a fantastic find for Norway," said
Lennert Koch, analyst at oil consultant Wood Mackenzie. "I think this is
quite an exceptional case. We're talking about potentially the third biggest
discovery in Norway ever."
Statoil's Dodson said test drilling in the Aldous Major
South field discovered this summer has shown it contains 900 million to 1.5
billion barrels of recoverable oil equivalent, compared with the previously
announced 400 million to 800 million barrels.
The reservoir is linked directly to Lundin Petroleum's
newly discovered field Avaldsnes, whose estimated size was quadrupled last
month to between 800 million and 1.8 billion barrels.
"Aldous/Avaldsnes is a giant, and one of the largest
finds ever on the Norwegian continental shelf," Dodson said.
Statoil shares were up 2.6 percent at 1612 GMT, while
shares in smaller Aldous partner Det Norske Oljeselskap had jumped 47 percent.
Lundin Petroleum which like Statoil has a stake in both fields, was up 8.7
percent. Det Norske major shareholder Aker was up 18 percent.
In an interview, Dodson said the estimates assume that 50
to 60 percent of the field's contents can be recovered but he said
technological advances could push that to 75 percent - extremely high by the
oil industry's standards.
"Even the initial production rates are going to be
very, very good because each well you put in there, especially in the best
parts of the reservoir, are going to produce like crazy," he said.
Aldous/Avaldsnes crude is also lightweight and simple to
refine, he said, adding to its value.
Combining the latest estimates for Aldous and Avaldsnes
gives a range of 1.7 to 3.3 billion barrels of oil equivalent, making the
discovery the largest on earth in 2011, according to Norwegian
The higher end would put the field, some 150 km (93
miles)west of Statoil's headquarters in Stavanger, just behind the Statfjord
and Ekofisk elephant fields in the all-time Norwegian continental shelf
Statoil expects the first oil from the field to come in
2017 and that it will produce for at least 30 years.
"By 2020 it will be a large contributor to the
overall production on the Norwegian continental shelf," Dodson said.
He said Statoil and Lundin would develop Aldous and
Avaldsnes as a single project that will likely require three or four
installations above and below the water.
The oil could be piped to shore using the nearby Grane
pipeline, though a new one may also be required, he said.
Arctic Securities oil analyst Trond Omdal said it was
obvious even before Friday's announcement that Aldous/Avaldsnes would be low-cost
oil because of shallow water and lots of nearby infrastructure.
Friday's bigger estimate, he said, means the crude can be
produced for as little as $10 per barrel, including development and operating
costs. The break-even cost for most new Norwegian fields in recent years has
exceeded $50 per barrel, he added.
Erik Haugene, the CEO of Aldous partner Det Norske, told
a news conference he would surprised if the break-even point exceeded $15 per
He also said Norwegian officials would likely appoint
Statoil operator of the joint field, which will eventually get a single name,
and that there was a good chance of finding oil at another adjacent oil
prospect, Aldous Major North.
After the announcement, DnB NOR Markets raised its target
price on Det Norske shares to 96 crowns from 78 crowns.
Oil production off Norway, the world's eighth-largest oil
exporter and the second-largest for gas, has been in decline for the last
decade, with oil majors like ConocoPhillips, BP and ExxonMobil turning their
focus to the Gulf of Mexico, Brazil and Angola.
Those trying to extend Norway's hydrocarbon age have
shifted attention north to the Norwegian Sea and the Barents Sea, but analysts
said Aldous-Avaldsnes gives the relatively mature North Sea a new lease on
"This discovery will bring new interest to the North
Sea," Omdal at Arctic Securities said. "A whole new generation of
Norwegians may see oil as an attractive career path."
He projected that it would turn out 500,000 bpd by 2020,
a level equal to a quarter of today's Norwegian output.
That will not make up for the average five-percent annual
drop in national production in recent years, he said, "but it will fill a
huge part of the gap".
If Aldous Major South and Avaldsnes together contain 3.3
billion barrels, their value at today's market prices for Brent crude would
total $360 billion, according to a Reuters calculation.
"This is clearly much larger that we had
figured," said John Olaisen of Carnegie.
Statoil is the operator of Aldous Major South and has a
40 percent interest. The partners are state-owned Petoro with 30 percent, Det
Norske with 20 percent and Lundin with 10 percent.