Statoil Could Close Chinese Oilfield Due to Low Output

Statoil is considering shutting down production at its only offshore field in China due to decreasing production rates. Lufeng 22-1, about 250 km southeast of Hong Kong in the South China Sea, is now producing 6,900 barrels per day (bpd) of oil, compared with its brief peak in 1998 of approximately 50,000 bpd, said Ove Flataas, Head of Production, Lufeng 22-1 Statoil (Orient) Inc. "Technically it was a success but commercially a disaster," Flataas told an industry conference in Shanghai.

The lease for the FPSO is due to expire in early 2004 and would likely be cancelled since the lease is too expensive.

It has yet to be decided if CNOOC will carry on the production to maintain its output target.

Statoil entered a production sharing agreement with CNOOC in 1996 and produced first oil in 1997. But the field's peak production was during a period when oil prices were at their lowest. Lufeng reached its top annual production in 1998 at 12 million barrels, with daily output peaking at 50,000 barrels for a few weeks, but oil prices that year were only $11 a barrel at the time. The field produced a total of 30 million barrels of sweet crude in the last six years. "By the end of this year, we may end up in balance because of high oil price now," Flataas said.