Statoil: Cost Cutting Revives Previously Unprofitable Norway Projects

Norwegian oil major Statoil (STO) said on Tuesday it will take a fresh look at projects previously deemed too expensive after successfully launching the Gullfaks Rimfaksdalen gas project at under half the originally estimated price.

Total costs for the Gullfaks Rimfaksdalen project are now seen at 3.7 billion Norwegian crowns ($445.07 million), down from 4.8 billion crowns in the plan for development and operation and an initial estimate of 8.8 billion. According to Statoil, this project was profitable even with the first cost estimate of 8.8 billion ... "Now it has become a very profitable project," project manager Hilde Reme told Reuters. The field has begun producing four months ahead of schedule. Arne Sigve Nylund, Statoil's head of development and production for Norway, said the Gullfaks Rimfaksdalen project will spur a new look at Statoil's portfolio off Norway, aiming to copy the formula on projects previously doomed as too expensive.
 

"The cost reduction we have achieved here makes it possible to bring out projects that previously seemed impossible and too expensive", Nylund told Reuters. Statoil has cut its average break-even price for projects on the Norwegian Continental Shelf to below $41 per barrel from a previous $70. Reserves of Gullfaks Rimfaksdalen are estimated to be around 80 million barrels of oil equivalent, mostly gas. Statoil is the operator with 51 percent ownership. Petoro (30%) and OMV (19%) are the other partners.

Reporting by Joachim Dagenborg