Statoil Stepping Up Arctic Exploration, Triples R&D Budget

STOCKHOLM–Norwegian oil and gas company Statoil ASA (STO) said Tuesday it is stepping up its exploration in the Arctic by drilling nine wells in the Barents Sea in 2013 and tripling its Arctic technology research budget.

The expanded investment deepens Statoil’s dominance of energy exploration and production in Arctic waters. It has drilled more than 90% of the wells in Norway’s Barents Sea and operates the only offshore gas production facility within the Arctic Circle–part of the Snohvit liquefied natural gas project.

The success in Norway’s Arctic backyard contrasts with reports of halting progress elsewhere in exploration for what are thought to be bountiful energy resources in the Arctic. The U.S. Energy Information Administration estimates there are over 400 billion barrels equivalent of recoverable oil and gas yet to be discovered throughout the Arctic.

Royal Dutch Shell PLC (RDSB.LN) has been forced to ask U.S. authorities to extend the deadline for drilling its first exploration wells in the Chukchi Sea off Alaska, because of delays caused by sea ice and problems in receiving Coast Guard certification for its oil spill recovery vessel, a person familiar with the matter said Tuesday. Shell now hopes to complete just two of the five wells this year it planned for the Chukchi and Beaufort Seas.

Separately, U.K.-listed explorer Cairn Energy PLC (CNE.LN) confirmed that it will not drill another well offshore Greenland until 2014, a gap of more than three years from the end of its last exploration program there, which failed to find commercial quantities of oil or gas. Statoil will be Cairn’s partner in the 2014 drilling program.

Statoil expressed confidence that it could successfully pursue the development of the 400 million to 600 million barrels of recoverable oil it has discovered at the Skrugard and Havis fields in the Barents Sea. “This is a less challenging area, as the Norwegian Barents is one of the only Arctic areas with a year-round ice-free zone,” said Statoil’s Exploration executive vice president, Tim Dodson, in a statement.

Statoil will be able to drill non-stop in the Barents Sea in 2013 thanks to a warm-water current from the North Atlantic that keeps the area free of the sea ice that curtails operations elsewhere in the Arctic. Shell and Cairn, in contrast, have faced drilling periods just a few months long in Alaska and Greenland.

In Alaska’s Chukchi Sea, Shell must finish drilling by September 24, although it has asked the U.S. Department of the Interior for an extra two weeks. Statoil intends to start drilling the Skrugard field in December and complete four wells there over a six-month period.

Statoil’s campaign will then continue with the drilling of two or three wells in the Hoop frontier exploration area further north next summer. Statoil said these will be the northernmost wells ever drilled in Norway.

In addition to increasing drilling activities, Statoil said it has created a technology road map to prepare for activities in even-harsher Arctic areas, which includes a tripling of the current Arctic research budget from 80 million kroner in 2012 to NOK250 million in 2013 ($13.7 million-$42.9 million).

“We also see the possibility of utilizing knowledge gained here for Arctic prospects elsewhere later on–just like we’ve already done with Snohvit,” Mr. Dodson said.

By Christina Zander and Alexis Flynn. (c) 2012 Dow Jones & Company, Inc.

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