Norway's Statoil Drops Upgrade of Mongstad Refinery

Norway's Statoil is dropping a planned upgrade at its Mongstad oil refinery in western Norway, it said on Wednesday, in another sign of oil companies cutting costs to cope with lower oil prices and difficult markets.

Statoil had been working on a project for two years on how to expand production capacity at Mongstad in order to be able to process oil from the offshore Johan Sverdrup field from 2019.

"The entire industry is experiencing a more demanding time, meaning that projects Statoil have both onshore and offshore need to be measured up against each other", Statoil spokesman Morten Eek said.

"This time, we have decided to postpone this upgrading project indefinitely."

Oil and gas companies have been cancelling investments and laying off thousands of workers, preparing for an extended period of low crude oil prices.

Local newspaper Strilen said the upgrade would have been worth between 5 billion Norwegian crowns ($588 million) and 7 billion. Eek declined comment on the size of the investment.

The Mongstad refinery, Norway's largest, has an annual production capacity of near 12 million tonnes of crude. Most crude refined at the plant comes from Norway's offshore fields, but Statoil also buys other types of oil to refine.

(By Henrik Stolen)