Marathon Says Alvheim Delays Due to Tight Oil Services Market

OSLO Mar 15, 2007 (Dow Jones Newswires)

The tight market for oil services equipment and personnel on the Norwegian continental shelf was a key contributor in the delayed startup of Marathon Norway's (MRO) 120,000 barrel-a-day Alvheim oil development, managing director Roger Wilson said Thursday.

Alvheim, the largest current oil development on the NCS, was due to come onstream in the first quarter of 2007, but first oil has been pushed back to the end of the second quarter due to difficulties in securing contracts and vendors in a market with "very tight resources", Wilson said.

The company said that a moderate amount of additional work would be needed on Alvheim's floating production storage and offtake unit, or FPSO, to which oil and gas production will flow via a sub-sea tieback.

"There are no major issues with the vessel, but we had to do more than envisaged due to the complexity of integrating the topside with the vessel," Wilson said.

He said the delay will have an impact on its overall 2007 output target for Norway, but added, "we're not talking about a major delay here, in a contract of this size." He said that the company doesn't give an individual country breakdown for production figures.

The $1.2 billion project will see oil offloaded to shuttle tankers from the FPSO and taken to the most attractive markets, while small quantities of oil will be exported to the U.K. gas market via the SAGE transport system.

Alvheim comprises the Kneler, Boa and Kameleon fields and together with nearby discovery Vilje, which is due onstream in mid 2007, it has a recoverable reserves base of between 200 million-250 million barrels of oil equivalent. Marathon owns a 65% operating stake in the asset, ConocoPhillips (COP) 20% and Lundin Norway (LUPE.SK) 15%.

Separately, Marathon's plan for development and operation, or PDO, for the Volund oil development which will be tied back to Alvheim, has now been approved by the Norwegian authorities and is on target for first oil in the second quarter of 2009, Wilson said.

"That's proceeding now, we've placed our main contracts with Acergy SA (ACGY)," Wilson said.

Marathon also intends to drill a well in the Bjorn prospect in production license 311 with the Bredford Dolphin drilling rig in the summer, Wilson said.

Marathon is one of the consortium member-operators of Bredford Dolphin. The rig is still in the yard being completed, Wilson said, although it was due to be in operation already.

Det Norske Oljeselskap AS (DNO.OS), another Bredford Dolphin consortium member, was recently rejected by Norway's petroleum safety authority as an operator of the rig, and is working to reverse that ruling.

While Marathon hasn't yet applied to the PSA to use the rig on the Bjorn prospect, Wilson said: "We clearly are in position get that approval. We know we are positioned to be able to meet the requirements. We've been drilling on the NCS for the past 12 months."

Copyright (c) 2007 Dow Jones & Company, Inc.

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