Statoil ASA (STL), the Norwegian oil producer exploring in the Barents Sea, is studying a scaled-back development plan for its Johan Castberg field to reduce costs.
The company is “looking at cheaper solutions,” Margareth Oevrum, executive vice president for technology, projects and drilling, said today in Stavanger. If Statoil makes no further finds in the area, “we may choose a much simpler solution.”
The company, which decided in June to delay its investment decision at Castberg after the government unexpectedly imposed higher taxes on oil, is drilling three more exploration wells in the area this year. Statoil, expanding off northern Norway to counter dwindling output in the North Sea, is among explorers reassessing development plans after crude prices declined.
Tax and cost increases and uncertain resource estimates at Castberg have forced Statoil to reconsider plans to build a 280-kilometer (170-mile) pipeline to bring oil to a new terminal in the North Cape, Oevrum said in an interview. The link, part of a development plan estimated at 80 billion kroner ($13.5 billion) in February, would also take volumes from any new nearby finds.
“Is it right to invest in that capacity now?” said Ola Anders Skauby, a spokesman for the Stavanger-based company. “Or is it more right to choose a simpler solution that only focuses on the resources we know of?”
Statoil, Norway’s largest oil producer, made a gas discovery at the Barents Sea’s Nunatak well in June that wasn’t commercially viable. The four wells around Johan Castberg, which may hold 600 million barrels of oil, are part of the biggest Norwegian Arctic exploration campaign in the company’s history.
Statoil, 67 percent owned by the state, has a goal to raise production by a quarter to 2.5 million barrels of oil equivalent a day by the end of the decade. Brent crude is trading at about $110.40 a barrel, 12 percent below its 2012 high.
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