Statoil ASA, Norway’s biggest oil company, put the Bressay heavy-oil project on hold as the collapse in crude prices undermines the profitability of production in the North Sea.
“Market conditions have changed” since Statoil asked in 2014 for an extension of one of the licenses for the field off the U.K., spokesman Knut Rostad said by phone. “We’ve made large improvements in the project in the past two years on the break-even, but the change has been very significant. We’ve therefore concluded that it wouldn’t be right to go forward with the project.”
Operator Statoil and partner Royal Dutch Shell Plc will seek to extend the license beyond this year and make the project more profitable, Rostad said. He declined to give details of the break-even improvements or when the project could eventually be developed.
Statoil, Shell and other oil companies are cutting spending after crude prices fell almost 70 percent since the middle of 2014. Producers and explorers in the U.K. will spend 40 percent less in 2016 than two years ago, lobby group Oil & Gas U.K. said last month. Statoil, which said in 2013 it was reconsidering Bressay, has cut investments by 35 percent over the past two years as it seeks to maintain shareholder payouts.
Bressay, discovered in 1976, is estimated to hold 100 million to 300 million barrels of recoverable reserves, according to Statoil’s website.
Oil & Gas U.K. said it was “disappointed but not surprised” at Statoil’s decision. The oil-industry lobby estimates that the worsening market in the last 18 months has made more than 1 billion barrels of potential oil and gas uneconomic to develop in the view of companies, said Chief Executive Officer Deirdre Michie.
“To attract price-constrained capital to the U.K., a coherent approach by the industry, regulator and government to reform costs, use of technology and fiscal terms will be critical,” she said.
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Upstream reported earlier about Statoil’s decision to put Bressay on hold.
The decision won’t impact on Mariner, another heavy-oil field off the U.K. that is due to start production in the second half of 2018, Rostad said.
(Updates with comment from Oil & Gas U.K. from sixth paragraph.)
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