Statoil Unlikely to Develop Snoehvit Oil

Snovit, Barents Sea
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OSLO JAN 10 2006 (Dow Jones Commodities News via Comtex)

Statoil ASA (STO) is unlikely to develop the oil resources at its Snoehvit field in the Barents Sea, despite prospects being raised by the nearby Goliat oil discovery, an executive at one companies involved in the license said Tuesday.

Statoil officials say they haven't yet determined whether the project can go ahead, but said such an undertaking may be hampered by shortage of drilling rigs and an expected reduction in the pressure needed for oil extraction.

Statoil said earlier this month that Eni SpA's (E) second oil discovery on the nearby Goliat field - bringing estimated reserves there to 100 million barrels - had revived Snoehvit's prospects.

Currently, Statoil plans to develop Snoehvit's 200 billion cubic meters of natural gas and over 100 million barrels of condensate, or light oil, but hasn't decided on the crude oil there.

"We need to see if Goliat could be the trigger for us to develop Snoehvit's thin oil zone," spokesman Sverre Kojedal said Tuesday.

While higher prices make such a project more attractive, Statoil estimated that only half of the approximate 500 million barrels of oil estimated to lie in the Snoehvit field would be accessible, Kojedal added.

Statoil spokesman Kristofer Hetland said oil extraction would be further limited because gas production will begin first - reducing pressure necessary in the reservoir for crude extraction. He said actual recovery could be limited to around 25 million to 50 million barrels.

Hetland said the current tight drilling rig market would also be a hindrance.

"We have a very demanding market right now, and we would have to drill several more test wells to verify crude volumes," Hetland said.

Statoil, as Snoehvit's operator, owns a 33.53% stake. Other owners include Total SA (TOT) with 18.4%, Gaz de France (1020848.FR) with 12%, Amerada Hess (AHC) with 3.26% and RWE Dea, a unit of RWE AG (RWE.XE), with 2.81% and state-owned Petoro with 30%.

Copyright (c) 2006 Dow Jones & Company, Inc.

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