Sept. 30 (Bloomberg) -- Lundin Petroleum AB increased its estimate of recoverable resources for the North Sea Avaldsnes prospect, part of a discovery that now ranks among Norway’s five biggest offshore finds. Lundin shares surged to a record.
Lundin, which operates Avaldsnes, raised its estimate for production license 501 to 800 million to 1.8 billion barrels of recoverable oil, it said today in a statement. Should the find reach the high end of the range it would be Norway’s third biggest, it said. The results from Statoil ASA’s discovery well at Aldous Major South were used to update the estimate.
Aldous Major South and Avaldsnes are part of Norway’s biggest discovery in more than 20 years. The combined oil structure is now estimated to hold 1.2 billion to 2.6 billion barrels of recoverable oil equivalent, compared with a previous estimate of 500 million to 1.2 billion barrels, Lundin said.
“Avaldsnes/Aldous, which is already a world class discovery has, following this year’s appraisal program, become significantly larger,” Chief Executive Officer Ashley Heppenstall said in the statement. “Avaldsnes and Aldous will be developed together and we are already working closely with our partners and Statoil ASA as operator of PL265 to ensure that the project proceeds without delay.”
Lundin jumped as much as 36 percent to a record 121 kronor in Stockholm. Statoil, which holds 40 percent in both Avaldsnes and Aldous, rose as much as 4.6 percent to 128.4 kroner, and Det Norske soared 17 percent to 45.5 kroner.
“Let’s be very clear here, this structure has still got the potential to be bigger -- big oilfields normally get bigger,” Heppenstall said in a presentation in Oslo.
Statoil found “significant upside potential compared with previously announced resource estimates for PL501 and will revert with the company’s updated volume estimates after completion of Statoil’s ongoing appraisal well 16/2-10 in Aldous Major South,” according to a separate statement today.
The company last week drilled a well at the Aldous Major North prospect that resulted in a discovery too small to be commercial. The Stavanger-based explorer said it stood firm by its estimates for the combined oil structure.
Statoil expects to start assessing development solutions for the combined field toward the end of the year, Tim Dodson, executive vice president for exploration, said last month. A stand-alone installation is most likely and production will probably start within six to eight years, he said.
Too Early to Cost
Heppenstall said it was too early to estimate how much a development would cost.
“It will depend on how big the eventual number is,” the executive said in an interview today. “Are we looking at the lower of the range or are we looking at something above 2 billion barrels. The unit capital cost will be significantly lower than other fields because of the sheer size.”
Statoil and Lundin have not decided on who will operate the combined field, a source of discord between the two companies, Dagens Naeringsliv reported earlier this month.
“We’ve already met at the high level and we’re looking together as one team how this will be developed,” Heppenstall said. “Who has what roles going forward, we’ll determine that after that work’s finished. We’re not saying what we want and don’t want at this point.”
Statoil estimates the field to have a rate of recovery of at least 50 percent. The country’s average recovery rate is 46 percent, according to the Ministry of Petroleum and Energy.
10 Feet Away
The Aldous-Avaldsnes discovery was made less than 10 feet (3 meters) from where Total SA, then Elf Aquitaine, drilled a dry well in 1971, according to Statoil.
“It’s like anything in life, it’s all about taking risk,” Heppenstall said. “If you look at the last 50 years in the oil business, the independent, smaller companies have been invariably better at finding. They’re not necessarily as good at developing, but they’re better at finding. That’s because of the short decision channels.”
Statoil operates the Aldous Major North and South license, in which Petoro AS holds 30 percent, Det Norske 20 percent and Lundin 10 percent. Lundin holds 40 percent in the Avaldsnes license, in which Maersk Oil owns 20 percent.
-- Editors: Alex Devine, Stephen Cunningham
To contact the editor responsible for this story: Will Kennedy at email@example.com