Shell drops Norwegian subsea gas project

Joseph Keefe
Friday, April 11, 2014

Royal Dutch Shell has dropped one of Norway's biggest and most innovative industrial projects due to rising costs and complexity, dealing a blow to a technology that some hope could revolutionise offshore production.

Shell said on Friday it would postpone a project to provide subsea compression at the North Sea's Ormen Lange, the second-biggest Norwegian gas field, despite the objections of a key license partner.

The decision will not be re-evaluated for several years, until new technology and reservoir information become available, Shell said.

Costs have soared in Norway's vast offshore oil sector over the past decade, and oil firms are cancelling or delaying major developments to save on costs and earn more cash for dividends.

Although Shell gave no cost estimate, a subsea compression project by Statoil at the Aasgard field is estimated to cost 15 billion crowns ($2.5 billion). Ormen Lange is more complex because waters are deeper and there would be no platform nearby to supply power and other equipment.

"The oil and gas industry has a cost challenge," Odin Estensen, chairman of the Ormen Lange Management Committee, said in a statement.

"This, in combination with the maturity and complexity of the concepts and the production volume uncertainty, makes the project no longer economically feasible."

Shell said it would not build a platform either given the costs and its new analysis shows that compression was not time-critical to the ultimate recovery of the field.

Petoro, the government's holding firm and the biggest shareholder in the licence, objected to the postponement, saying the project had already cost "several billions of Norwegian crowns".

The move shows that "the major oil companies now are going meticulously through their portfolios and cutting the most marginal projects to limit their investment level", Haakon Amundsen, an analyst at ABG Sundal Collier, said.

"There have been six to seven similar delays now, so this would not come as a shock to anyone. This is a gas project with new technology and production many years away, sometime in the future, so it is obviously vulnerable to high costs," he added.

Statoil has already delayed its $15.5 billion Arctic Johan Castberg projects and pushed back by one year the start-up date of Johan Sverdrup, Norway's biggest oil find in decades.

Ormen Lange produces an equivalent of a fifth of Britain's gas needs, and will eventually lose its natural pressure. Subsea compression was seen as a cheaper alternative to building a platform.

A Shell spokeswoman said: "We are not giving up on offshore compression at Ormen Lange, but we can't give any timeline (for how long the postponement could last)."

Norwegian oil services firm Aker Solution designed and built the compression pilot project for the field, hoping Shell and its partners would use the technology.

Subsea pumps could have squeezed more from the field and eliminate the need to keep workers offshore, but it is a new and still untested technology.

Shell is the operator of Ormen Lange with a 17.8 percent stake, while Norway's state-owned Petoro has 36.5 percent, Statoil 25.4 percent, Dong Energy 14 percent and ExxonMobil 6.3 percent.

Shell said Petoro was the only partner against postponing the offshore compression project.

By Balazs Koranyi and Joachim Dagenborg

Maritime Reporter August 2015 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds


USCG Reopens Key West Ports After Erika Dissipates

Effective 9:30 a.m., Saturday, Capt. Jeffrey Janszen, Coast Guard Captain of the Port, reopened Key West, Florida, ports, terminals and facilities due to Tropical Storm Erika dissipating.

MN 100: Bordelon Marine

The Company: Founded in 1979, Bordelon Marine is a leading provider of Marine Transportation services operating in the Gulf of Mexico and around the world. The

Migrant Boat Sinks off Libya; 200 Feared Dead

A boat packed with mainly African migrants bound for Italy sank off the Libyan coast on Thursday and officials said up to 200 might have died. A security official in the western town of Zuwara,


China Passes New Pollution Law, Will Cap Coal Consumption

Legislators have approved amendments to China's 15-year-old air pollution law that grant the state new powers to punish offenders and create a legal framework to cap coal consumption,

Marad Celebrates Deployment of Maritime Fuel Cell Project

The U.S. Department of Transportation’s Maritime Administration (MARAD) today celebrated the launch of field trials for the first prototype hydrogen fuel cell

Gazprom, OMV Meet on Establishing Nord Stream JV

At a Meeting held at the Gazprom headquarters between Alexey Miller, Chairman of the Company's Management Committee and Rainer Seele, Chairman of the Executive Board of OMV,

Offshore Energy

MN 100: Bordelon Marine

The Company: Founded in 1979, Bordelon Marine is a leading provider of Marine Transportation services operating in the Gulf of Mexico and around the world. The

Yamal LNG Arctic Project in Doldrums

The massive $27 billion Yamal LNG liquefied-natural-gas venture in the Arctic Circle, a centerpiece of President Vladimir Putin’s plan for Russia has been squeezed by U.

MHI, SBG Invest in Wind Energy Startup Altaeros Energies

Mitsubishi Heavy Industries, Ltd. ("MHI") and the Suhail Bahwan Group ("SBG") have invested in Altaeros Energies, a Massachusetts-based technology company, to

Maritime Careers / Shipboard Positions Maritime Contracts Maritime Security Maritime Standards Navigation Pod Propulsion Salvage Ship Electronics Ship Repair Sonar
rss | archive | history | articles | privacy | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.6858 sec (1 req/sec)