Statoil Postpones Decision on Flagship Oil Project

polar pioneer drilling rig johan castberg
Polar Pioneer semisubmersible drilling at Johan Castberg, image (c) Harald Pettersen/Statoil

reuters logoOSLO, June 30 (Reuters) – Statoil has postponed a decision on the development concept for its flagship Johan Castberg Arctic oil project until the summer of 2015 after a disappointing drilling campaign, the Norwegian oil firm said on Monday.

The project comprises two discoveries, Skrugaard and Havis, which became a breakthrough for the Barents Sea as a new oil province, with volumes estimated at 400-600 million barrels of oil.

“The Johan Castberg partners have decided to spend the time leading up to the summer of 2015 to make the final concept selection for the project,” Statoil, the field’s operator, said in a statement.

The Norwegian oil firm, which holds a 50 percent stake in the project, said the exploration campaign had found less oil than expected.

“In total, we have not proven enough resources in Castberg to make the field viable for supporting infrastructure, including a pipeline to shore and an onshore terminal on its own,” said Arne Sigve Nylund, Statoil’s executive vice president for Development and Production Norway.

Statoil had been confident of finding more resources than the initial estimate of 400-600 million barrels. But in May the firm said the results of the latest, and final, round of drilling were disappointing.

Last year, Statoil suspended the development of the $15.5 billion Castberg project due to rising costs and a tax increase.

The firm has previously said it was looking at two options for the field’s development: building a pipeline to deliver oil to an onshore terminal, or having a floating production storage and offloading (FPSO) facility.

The latter is cheaper, and Statoil has previously said it is the more likely option, but the pipeline would provide opportunities to tie in other discoveries in the area.

Statoil’s partners in the field are Italian firm Eni with 30 percent and Norwegian state-owned Petoro with 20 percent. (Reporting by Joachim Dagenborg and Nerijus Adomaitis; Editing by Henrik Stolen and Pravin Char)

(c) 2014 Thomson Reuters, All Rights Reserved