Shell Drops Novel Norwegian Subsea Gas Project, Cites Costs


OSLO, April 11 (Reuters) - Royal Dutch Shell has dropped one of Norway's biggest and most innovative industrial projects due to rising costs and complexity, dealing a blow to a technology that some hope could revolutionise offshore production.

Shell said on Friday it would postpone a project to provide subsea compression at the North Sea's Ormen Lange, the second-biggest Norwegian gas field, despite the objections of a key licence partner.

The decision will not be re-evaluated for several years, until new technology and reservoir information become available, Shell said.

Costs have soared in Norway's vast offshore oil sector over the past decade, and oil firms are cancelling or delaying major developments to save on costs and earn more cash for dividends.

Although Shell gave no cost estimate, a subsea compression project by Statoil at the Aasgard field is estimated to cost 15 billion crowns ($2.5 billion). Ormen Lange is more complex because waters are deeper and there would be no platform nearby to supply power and other equipment.

"The oil and gas industry has a cost challenge," Odin Estensen, chairman of the Ormen Lange Management Committee, said in a statement.


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