Chevron Says North Sea Discovery Won't Pay to Develop

Chevron Corp. (CVX), the world’s second-largest non-state energy company by market value, said its Rosebank oil discovery off the coast of Scotland would be unprofitable to bring into production at this time.

Chevron plans to continue evaluating the 240 million-barrel field along with partners OMV AG (OMV) and Dong Energy A/S for ways to improve the project’s potential returns, the San Ramon, California-based company said in an e-mailed statement today. A final decision on whether to proceed will be made next year, according to the statement.

Rosebank’s unprofitability is a blow to U.K and Norwegian efforts to halt the slide in North Sea oil output as fields first drilled in the 1970s and 1980s near the end of their productive lifespans. Dropping North Sea supplies are expected to drive a 15 percent decline in European crude and gas liquids production by 2018, the Organization of Petroleum Exporting Countries said in its annual world outlook on Nov. 7.

Rosebank “does not currently offer an economic value proposition that justifies proceeding with an investment of this magnitude,” Chevron said in the statement.

Chevron and its partners hired South Korea’s Hyundai Heavy Industries (009540) Co. Ltd. in April to construct a $1.9 billion platform that could offload crude directly to tankers, Hyundai said in a Nov. 15 slide presentation. The vessel would have capacity to draw 100,000 barrels of oil and 190 million standard cubic feet of gas daily from the seafloor.

Chevron hasn’t disclosed any cost estimates for the total development. Rosebank is located 80 miles (130 kilometers) northwest of the Shetland Islands and 3,700 feet (1,130 meters) beneath the sea surface.

Chevron discovered Rosebank in 2004 and owns a 40 percent stake. OMV owns 50 percent and Dong holds a 10 percent interest.

Exxon Mobil Corp. is the largest oil company by market value, according to data compiled by Bloomberg.

To contact the reporter on this story: Joe Carroll in Chicago at jcarroll8@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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