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

Offshore

Seadrill: Rig Rates Have Not Bottomed

The market for oil and gas drilling rigs continues to deteriorate as oil companies cut back on investments, Seadrill Chief Financial Officer Rune Magnus Lundetrae

‘Blue Queen’ on First Mission

The platform supply vessel 'Blue Queen', an ULSTEIN PX121 design, was named at Ulstein Verft on Friday 27 February. The ship will be working in the spot market.

Fiji Maritime Academy Bullish on Prospects

The Fiji Maritime Academy (FMA) is on the right track to become one of the finest maritime training institutions in the region. It has also achieved an important

Energy

BG Group's Australian Project Helping to Double LNG Supplies

A smooth start to operations at BG Group's Australian project in Queensland is expected to help the British company to roughly double its liquefied natural gas (LNG) supplies in 2015/16,

Seadrill: Rig Rates Have Not Bottomed

The market for oil and gas drilling rigs continues to deteriorate as oil companies cut back on investments, Seadrill Chief Financial Officer Rune Magnus Lundetrae

Ghana-Ivory Coast Maritime Dispute Mar Tullow

A dispute over maritime boundaries between Ghana and Ivory Coast is damaging Tullow Oil, which risks postponement of its TEN project in the waters off Ghana's coastline.

Offshore Energy

Seadrill: Rig Rates Have Not Bottomed

The market for oil and gas drilling rigs continues to deteriorate as oil companies cut back on investments, Seadrill Chief Financial Officer Rune Magnus Lundetrae

‘Blue Queen’ on First Mission

The platform supply vessel 'Blue Queen', an ULSTEIN PX121 design, was named at Ulstein Verft on Friday 27 February. The ship will be working in the spot market.

Gulf of Mexico Oil Production on the Rise

Because of the long timelines associated with Gulf of Mexico (GOM) projects, the recent downturn in oil prices is expected to have minimal direct impact on GOM crude oil production through 2016.

 
 
Maritime Security Maritime Standards Navigation Pod Propulsion Salvage Ship Electronics Ship Repair Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | 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: 0.1766 sec (6 req/sec)