Norsk Hydro Secures Rig for Shtokman Well Project

OSLO, Sep 13, 2005 (Dow Jones Commodities News via Comtex)

Norsk Hydro ASA (NHY) has secured a rig to drill a key well on OAO Gazprom's (GSPBEX.RS) 3.2 trillion cubic meter Shtokman natural gas field in the Russian Barents Sea, several people close to the situation told Dow Jones Newswires Tuesday.

The sources said Norsk Hydro would use its contract options with private Norwegian oil company Odfjell Drilling AS to drill the seventh well Shtokman.

In April, Dow Jones Newswires reported that Norsk Hydro had been appointed as technical advisor for the well, and industry experts said the appointment indicated Hydro was well situated for a stake in the project.

Norsk Hydro is one of several companies vying for a stake in the Shtokman field, signing a Memorandum of Understanding last year to explore possible partnership possibilities with Gazprom.

The results of the appraisal well could help to determine the timing and makeup of the Shtokman development partnership, one of the people close to the deal said.

The well will also provide a clearer picture of the scope of reserves located in the gas field, officials at Gazprom and its subsidiary Sevmorneftagaz said. This could possibly prompt an increase in reserve estimates to as much as 3.8 tcm, they added.

Another person close to the deal said Hydro would use its contract with Odfjell Drilling - which includes a 36-month option to drill at Hydro's discretion - for Odfjell's Deepsea Delta to start drilling on the seventh well in May next year.

The rig - with Hydro acting as operator - will drill in 320 meters of water down to 2400 meters below the seabed. Gazflot, the source added, would build an onshore supply base.

Norsk Hydro spokesman Lars Bjelvin declined to comment, while press officers at Gazprom and Gazflot couldn't immediately be reached for comment. Odfjell Chief Executive Kjetil Lenning also declined to comment on whether Hydro had asked his company to drill at Shtokman, but said it was public knowledge that Hydro had options built into its contract.

A third person close to the situation said Norwegian rival Statoil ASA (STO) also tried to secure a rig using its rig options.

In August, Gazprom announced a shortlist of companies that may win a stake in one of the biggest gas projects in the world.

Besides Norsk Hydro, Gazprom named Chevron Corp. (CVX), ConocoPhillips (COP), ExxonMobil Corp. (XOM), Mitsui & Co. Ltd. (MITSY), Royal Dutch Shell PLC (RDSB.LN), Statoil ASA (STO), Sumitomo Corp. (8053.TO) and Total SA (TOT) submitted feasibility studies for development of the Shtokman field and construction of an LNG plant, Gazprom said.

Copyright (c) 2005 Dow Jones & Company, Inc.

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