Statoil's Visund Field May Be Shut Down for 6 Months

OSLO, Jan 27, 2006 (Dow Jones Commodities News via Comtex)

The Statoil ASA (STO) operated Visund oil and gas field may be shut down for up to six months following a major gas leak at the North Sea platform earlier this month, three people close to the matter told Dow Jones Newswires Friday.

Industry experts say if the cause of the leak is determined to be a design or materials flaw, it may have implications for several other Norwegian oil and gas platforms.

Statoil, along with police and Norwegian Petroleum Safety Authority investigators, are still trying to determine the exact cause of the Jan. 19 leak that forced the shut-in of 35,000 barrels of oil and 5 million cubic meters of natural gas a day.

The PSA called the leak one of the most serious gas leaks on the Norwegian Continental Shelf, with a half-meter wide hole blown out of a flare pipe, and said was only "pure luck" that the incident didn't turn into another Piper Alpha disaster. In 1988, a gas blowout killed 167 workers on the U.K. North Sea Piper Alpha platform.

Although Statoil and PSA officials said it was too early in the investigation to say what the exact cause of the blow-out was, two of the people close to the matter said it didn't appear at this stage to be negligence by Statoil.

Rather, they said, investigators are becoming increasingly convinced that there was a material or design failure in the flare system.

Bjoern Tjessem, a deputy leader at the SAFE oil workers union, said if the cause did turn out to be a design or material failure or weakness, it would likely have implications on several other platforms on the Norwegian Continental Shelf, potentially forcing replacements and shutdown.

Norway is the world's third largest crude exporter in the world and Europe's second biggest natural gas supplier.

Statoil said it had been it had received calls from other operators concerned about whether the blow-out might have implications for their installations, but that no official warning had been issued yet because no definitive cause had been determined.

Norsk Hydro ASA (NHY) Senior Vice President of Media Relations Tor Steinum said without elaborating that his company had similar flare systems as the one on Visund. He said Statoil would likely send out an official warning if a design or material failure was found.

One of the people close to the incident said Hydro's Oseberg is one of several platforms that may have a similar design or materials.

One person with direct contact with workers on the Visund platform said pieces of the flare pipe were found all over the topside of the platform. The person said because of all the testing, investigations and procedures necessary following such a significant incident, it would likely take at least several months to restart.

Last year, Statoil was fined $12 million - the largest fine the government has ever levied against an oil company - for a gas blow-out at its Snorre B platform. No one was injured, but both the PSA and the court that issued the fine condemned the incident and Statoil's handling of the affair.

The PSA said last week it had begun an investigation to see whether there is a link between a rash of problems at Statoil ASA-operated fields, including at Visund and two fire incidents at Asgard B.

Statoil Chief Executive Helge Lund told reporters at a conference last week there was nothing to indicate at present a failure in the company's health and safety regulations.

As operator, Statoil owns 32.9% of Visund. Other owners include state-owned Petoro with 30%, Norsk Hydro ASA (NHY) with 20.3%, ConocoPhillips (COP) with 9.1% and Total SA (TOT) with 7.7%.

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