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

Offshore

Chevron Hires Norce Endeavour for Thailand Ops

Solstad Offshore ASA (SOFF) has fixed the 2011-built 18,000 dwt crane barge Norce Endeavour to Chevron for work in Thailand next year for around 200 days.   Solstad

2 Damen Tugs for KOTUG’s European Harbor Towage

Damen Shipyards Group delivered two sister tugs ATD 2412 ‘ZP Bison’ and ‘ZP Bear’ to strengthen KOTUG’s European Harbour Towage. On April 8th 2015, the sister

PSV Launching Ceremony at Gondan

At high tide today at Gondan Shipyard in Figueras, the New PSV (TBN) for the Norwegian Ship-Owner, Simon Møkster Shipping, was launched. Different personalities

Energy

Khamenei Says Iran Nuclear Weapons are a U.S. "Myth"

Iran's Supreme Leader Ayatollah Ali Khamenei told military commanders on Sunday the United States had created the "myth" of nuclear weapons to portray Iran as a threat,

New CEO for Evergas

Evergas has appointed Steffen Jacobsen as CEO of the company as of 8 May 2015 Mr. Jacobsen joined Evergas 1 February 2015 as Vice President, Fleet after almost 35 years in Maersk.

Icebreakers Ordered for Neft’s Novy Port Project

Aker Arctic’s icebreaker design selected for Gazprom Neft’s Novy Port project   Aker Arctic and Vyborg Shipyard have confirmed a contract for the design of two

Offshore Energy

Termination of Seadrill Unit's and Rosneft Deal Extended

North Atlantic Drilling (NADL), a subsidiary of Seadrill, will delay the closing of a deal with Russia's Rosneft by two years and has agreed to renegotiate the terms of the agreement,

Chevron Hires Norce Endeavour for Thailand Ops

Solstad Offshore ASA (SOFF) has fixed the 2011-built 18,000 dwt crane barge Norce Endeavour to Chevron for work in Thailand next year for around 200 days.   Solstad

PSV Launching Ceremony at Gondan

At high tide today at Gondan Shipyard in Figueras, the New PSV (TBN) for the Norwegian Ship-Owner, Simon Møkster Shipping, was launched. Different personalities

 
 
Maritime Contracts Maritime Security Naval Architecture Navigation Pipelines Pod Propulsion Ship Repair Ship Simulators Sonar Winch
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: 0.1857 sec (5 req/sec)