Klegg Development on Fast Track

Two months ago, Hydro found oil in the Klegg prospectus between Heimdal and Vale in the North Sea. The company now plans to submit the Plan for Development and Operation next year. This may mean a new field development in 2006.

The project on the Plan for Development and Operation (PDO) for Klegg (PL036) has already started. The newly appointed senior vice president for Hydro's Exploration and Development sector, Lars Christian Alsvik, has ambitions of developing this oil find in a record short time.

"According to experience, it takes many years to plan operation and production solutions for this type of discovery. We are now aiming for rapid completion, with the target of submitting a PDO before December 1, 2004, and production start in 2006," says Alsvik. "It will apparently be possible to achieve a good rate of recovery due to natural pressure support from the water zone, although gas support will probably be necessary in the wells and pipeline. We envisage a subsea development linked to Heimdal or other installations in the area," he continues.

Possible licence collaboration
In addition to the evaluation of the discovery itself, Hydro is also considering the possibility of a collaboration between PL 036 Klegg and three other licenses with proven oil resources in the area. These are in the Marathon-operated Alvheim field (PL203, PL 088 BS and PL036 C).

"We know that Marathon is considering an independent development of Alvheim. However we believe it may be cost effective and socio-economically beneficial to develop the Alvheim and Klegg area jointly."

Hydro is also considering other development solutions for Klegg oil. New technology can make it possible to transport the oil in the pipeline from the gas field Vale.

A new era on the Norwegian continental shelf
Klegg is a good example of what Hydro and other companies can expect to find on the Norwegian continental shelf in the future. Klegg is not a large discovery like Ekofisk, Statfjord or Troll, but with the help of modern technology and expertise, Hydro hopes to make smaller discoveries profitable. The goal is to bring these discoveries into production as soon as possible, and with maximum cost efficiency.

"The latest calculations show that the Klegg discovery contains around 120 million barrels of oil. Hydro believes that the discovery can be developed in a profitable way. Hydro wishes, in other words, to adapt to the new situation on the Norwegian continental shelf.

This means that we have to further develop our technology and expertise, and find new, smarter ways of working so that we are able to create value from smaller discoveries than before.

We believe that if the government authorities make changes to the frame conditions, it will be possible to maintain the level of activity on the Norwegian continental shelf in the future," Alsvik points out.

"The time factor is important; we have to be able to use existing infrastructure, platforms and pipelines if these projects are to be profitable. Many fields are approaching or are already in tail-end production, and when they close down and the infrastructure is no longer there, it will be considerably more difficult to make these developments profitable."

Hydro is operator on production license 036 Klegg, with an ownership of 28.5 percent. The other licensees are Marathon (46.9 percent) and Total (24.2 percent).
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