Statoil ASA's (STO) Kristin gas field in the Norwegian Sea won't reach its plateau production - around 230,000 barrels of oil equivalent gas a day - until almost a year later than planned, a person at one of the partner companies told Dow Jones Newswires Friday.
Based on the company's original development plan submitted to the government, the gas and condensate project was supposed to hit plateau output in December this year.
"Now they plan to reach plateau (output) in late 2006, which means a year of delayed production," the person said. "It's a huge loss...with all the volumes we're supposed have."
The project, currently one of Statoil's largest, has been plagued with problems, including drilling delays, health and safety concerns and cost overruns.
Earlier this year, Statoil's Chief Executive Helge Lund announced a second cost overrun - bringing the project's cost to over 20 billion Norwegian kroner ($1=NOK6.3873) - and said it would take longer than expected to ramp up production. The company then declined to give any details about the length of the delay.
Spokeswoman Kjersti Morstoel said Friday, "When it comes to Kristin, it is known that the production will go gradually up after production-start." She said she couldn't elaborate on the timing.
DnBNOR equities analyst Bjoern Inge Toennessen said: "We knew there were going to be delays, but it's a negative surprise that it's going to be that long."
Test production was originally planned to begin in June or July, with an official start on October 1, quickly ramping up to full output by December.
But Kristin's high temperature, high pressure reservoir created one of the most complex drilling environments Statoil's ever encountered in Norway, the company said.
"Pressure and temperature...are higher than on any other field so far developed on the Norwegian continental shelf," Statoil said on its Web site.
Another person close to the operation said earlier this year that unlike most projects, where production could start upon completion of the first production well, it appeared that Statoil would have to wait until several, if not all, of the wells were drilled before startup. A total of 12 wells are supposed to be drilled.
"Otherwise, they risk a (gas) blowout," the first source at one of the partner companies said.
Further delays have lately been caused by lifeboat problems. Defects on several of the new lifeboats were found, forcing the company to send them back to the manufacturer for modifications and tests.
At Statoil's second quarter earnings presentation earlier this week, Lund said it was too early to give any guidance on the impact the lifeboat problem would have on production start-up.
But one of the projects managers later told Dow Jones, "for every day that goes by (without the lifeboats), we're looking at delays to start-up.
The first source close to the situation said that by Statoil's calculations, the project was around 220 days behind schedule.
As operator, Statoil owns 41.6% of the project. Other owners include state-owned Petoro with 18.9%, Norsk Hydro ASA (NHY) with 14%, ExxonMobil Corp. (XOM) with 10.5%, ENI SpA (E) with 9% and Total S.A.(TOT) with 6%.
Copyright (c) 2005 Dow Jones & Company, Inc.
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