Atlantic Petroleum Commencing Its First Field Development

The development of the Chestnut Field will take place with the use of new technology, which is expected lower the economic threshold for development of oil fields in the North Sea.

Venture Production on behalf of itself and its partners, Bow Valley Petroleum (UK) Limited and Atlantic Petroleum UK Limited, has entered into a Letter of Intent with Sevan Marine ASA for the use of Sevan's floating production unit SSP 300 FPSO on the Chestnut field in the central UK North Sea, in a water depth of about 120 m.

First oil expected 2007

The Chestnut field is the first of three discoveries, in which Atlantic Petroleum participates, that is being developed. But also the development of the Perth field is getting closer. The Chestnut field is expected to produces its first oil in 2007.

"With today's event, Atlantic Petroleum takes a step closer to becoming an upstream oil producer. Wilhelm Petersen, the company's Managing Director, said "We are convinced that the partnership has selected the right option for a safe and cost effective development of a field that by yesterday's standards was marginally economic. The innovative technology employed should provide the group with a good return on its investment and allow the United Kingdom to capture rent that would otherwise have stayed in the ground. This also underlines our position as an active partner in a consortia seeking innovative solutions to developing small oil and gas fields profitably."

New cost-effective technology

The Sevan SSP development solution is significantly less capital intensive than either a sub-sea tieback to a nearby host platform or a conventional ship shaped FPSO. The Sevan SSP offers a simple, re-usable, cost-effective solution which has the potential to lower the economic threshold for economic development of 'stranded' oil fields in the North Sea,. A number of 'stranded' oil fields in the North Sea could become economically interesting by make use of the cost-effective Sevan SSP development solution thus extending the oil reserves in the North Sea.

The Chestnut field is being developed with reserves of between 7 and 15 million barrels and as such this will be one of the smallest standalone field developments yet, in the North Sea.

The Chestnut SSP is the second unit contracted by Sevan Marine this year, as the Company has already signed an 11-year contract with the Brazilian oil company Petrobras S.A. for the provision of one SSP 300 to the Piranema field, with first oil expected mid-2006.

"The agreement with Venture demonstrates the versatility of the SSP design. The North Sea has a number of small and medium sized fields that require innovative stand-alone development solutions, and the SSP technology provides a viable technical and economical solution for those fields," says Jan Erik Tveteraas, CEO of Sevan Marine ASA.

Contract details

The fixed term of the charter contract is 30 months, with extension options for an additional 24 months. The SSP 300 FPSO will be installed on the Chestnut field during the first half of 2007 with first oil following hook-up of wells to the facility. Plateau production from the field is expected to be around 10,000 bopd.

The contract value for the fixed term is approximately USD 64 million, excluding the value of any operational services to be performed by Sevan Marine. The SSP 300 FPSO will be equipped with a process plant capacity of 30,000 barrels of oil per day, a water injection plant with a capacity of 20,000 barrels per day and an oil storage capacity of 300,000 barrels.

The execution of the project is subject to the usual Regulatory Authorities approvals, for example a Chestnut Field Development Plan and Environmental Statement. The processes for these approvals are already well underway.

About the field The Chestnut Field is to be developed by Venture Production (North Sea Developments) Limited, (the Operator), Bow Valley Petroleum (UK) Limited and Atlantic Petroleum UK Limited whose participating interests are 69.875%, 15.125%, 15% respectively. Chestnut is located entirely within Block 22/2a; approximately 13 km SSE of the Chevron Texaco operated Alba Field. The Chestnut Field was discovered in 1986. The reservoir is the Eocene Nauchlan Sand at a depth of some 6900 ft. The field has been appraised by six wells. The reservoir can only be effectively imaged by shear-wave 3D seismic, which was acquired in 2000. The 22/2a-11x well was drilled in 2001 and placed on extended test. The well produced approximately 1 MMb during the test. The well test helped to reduce the STOIIP uncertainty and confirm the reservoir deliverability. A new water injection well will be drilled as part of the development.

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