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Statoil Disappointed as Oil Hopes Fade at Delayed Arctic Project

Statoil ASA said a fourth well meant to boost oil resources at its delayed Johan Castberg project in the Barents Sea found only gas, increasing pressure on Norway’s biggest energy company to cut development costs.

The Stavanger-based company found 2 billion to 4 billion cubic meters of gas at the Kramsnoe prospect, the Norwegian Petroleum Directorate said in a statement today. The company has now drilled four out of five wells in its Castberg exploration campaign, finding oil at one of them in December.

“The exploration campaign is serving its purpose of maximising our knowledge of the area, but has not provided the additional resources we hoped for,” Erik Strand Tellefsen, vice president for field development in northern Norway, said in a statement. “This makes it even more important to improve the development concept and reduce investments.”

Statoil, which is pushing into the Arctic waters of the Barents Sea to make up for falling output from aging fields in the North Sea, last year delayed its investment decision on the Castberg project because of higher costs, taxes and uncertainty surrounding resource estimates of 400 million to 600 million barrels of oil. It shelved plans for a $15 billion development including an oil hub at North Cape designed to handle volumes from future discoveries, saying it is studying cheaper alternatives and seeking to add volumes from nearby finds to make the project more profitable before making a decision.

The 67 percent state-owned company found 20 million to 50 million barrels of oil at Skavl, the third well in the Castberg campaign. The first two wells proved only gas. Statoil will start on the last prospect of the campaign, Drivis, as soon as Kramsnoe has been completed, it said in its statement today.

Statoil this month cut investment plans for the next three years by 8 percent to focus on higher returns for shareholders amid rising costs.

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