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Norway’s Arctic oil hub dream fades as Lundin no help to Statoil

MIKAEL HOLTER

STOCKHOLM, Sweden (Bloomberg) -- Lundin Petroleum and Statoil ended talks on jointly building an oil terminal in Norway’s Arctic, dealing a blow to the nation’s hopes of creating a hub for Barents Sea fields in an effort to revive its falling output.

Stockholm-based Lundin’s Alta and Gohta discoveries are too far from Statoil’s Johan Castberg deposits to warrant joint development, and the resource estimate for the Swedish explorer’s discoveries is too uncertain to commit to any investments in an onshore oil terminal or pipelines, said Ashley Heppenstall, its CEO. The talks never got beyond a preliminary level, he said.

“Any discussions with Statoil from our perspective is difficult at this stage, because we can’t really help them,” Heppenstall said by phone. “We need to do more drilling on Alta and Gohta and to first of all understand how much we have.”

The decision to end talks reduces the probability that state-controlled Statoil will invest in a new onshore oil terminal at North Cape in connection with its Castberg project. The hub, which was part of the original plans shelved in 2013, would be a key step in making the remote Barents Sea a new petroleum province for the Nordic nation whose crude production has been halved since 2000 as aging North Sea deposits are depleted.

Prospects for developing deposits in Norway’s remote northern seas are also being undermined by the plunge in crude oil prices to below $50/bbl.

Development Concept

Statoil, which plans to present a development concept for Castberg in July, wouldn’t comment on the talks with Lundin and other companies, spokesman Oerjan Heradstveit said by email.

“To realize a terminal we need to get larger volumes in from the Barents Sea or have other partners contribute in the investment and operation of the terminal,” he said.

Statoil, which is also studying a development solution with a floating production, storage and offloading unit, signaled last week it could be forced to delay Castberg for a third time.

Statoil last postponed Castberg in June, after an exploration campaign failed to provide sufficient volumes to alleviate profitability concerns. It said later it had turned to owners of other discoveries in the area such as Lundin and OMV AG to seek ways to share expenses and make all developments more profitable. The Norwegian Petroleum Directorate, the country’s regulator, in October urged Statoil, Lundin and others to combine their finds and share investments.

The Johan Castberg deposits hold from 450 MMbbl to 650 MMbbl of oil, while Alta is estimated to contain from 85 MMbbl to 310 MMbbl of crude. Gohta holds 60 MMbbl to 145 MMbbl of oil.