StatoilHydro, CNPC Study Oil Recovery Options In Norway, China

BEIJING, March 26, 2008 (Dow Jones Newswires)

As Norway's oil output stagnates, state energy giant StatoilHydro ASA is enlisting Chinese help in finding new ways to recover more crude from its offshore fields.

Contracts signed earlier this month between StatoilHydro and China National Petroleum Corp. for a joint study of different injection technologies mark their first agreements since they inked a strategic pact last year.

High oil prices are making expensive technologies more attractive at a time when oil producers are searching for ways to squeeze more crude oil from fields that have been in production a long time.

Norway's average daily output in 2007 was just above 2.2 million barrels of oil, with total production for the year under that achieved in 2006.

Under the terms of the agreement, CNPC will demonstrate water-based methods for increasing oil recovery at a field in Norway, said Astrid Jorgenvag, vice-president of Research and Development, Increased Oil Recovery, StatoilHydro.

CNPC has been injecting polymer - a chemical - into its flagship Daqing oil field in northeastern China for several years and total production from enhanced oil recovery has exceeded 733 million barrels.

"We haven't much experience of chemical injection, and other water-based methods," Jorgenvag told Dow Jones Newswires.

In return, CNPC has agreed to StatoilHydro injecting gas into a producing Chinese oil field, most likely in the northern province of Jilin. Both projects will last up to two years, Jorgenvag said.

Studies by StatoilHydro indicate injecting carbon dioxide into reservoirs can lead to up to 7% more original oil-in-place being brought to the surface.

It also offers a way to reduce the potential risks from climate change by capturing greenhouse gases and storing them underground.

StatoilHydro has been injecting CO2 into the Sleipner area of the North Sea since 1996.

In that time, more than a million metric tons of CO2 have been stored annually some 1,000 meters below the seabed, equivalent to a year's carbon emissions from all petroleum operations on the Norwegian Continental Shelf.

In addition, StatoilHydro has been injecting CO2 into an aquifer under the Snohvit field in the Barents Sea, and at the In Salah gas field in the Sahara desert in Algeria, where the company partners BP PLC and Sonatrach.

"The fields on the Norwegian Continental Shelf already have a high recovery factor," said Jorgenvag, explaining StatoilHydro's interest in new injection technologies.

"Some of the fields which have been in production since the mid-1980s have an oil recovery rate of 60%-65%, some even higher."

Many oil fields in Norway use natural gas injection to boost the amount of crude produced from each well, but this is expensive, especially as gas prices are rising in step with demand for cleaner burning fuels.

StatoilHydro's project with CNPC isn't the first it has conducted with foreign partners.

Last month, it trumpeted success in developing processes for raising oil recovery with oil field services firm Schlumberger Ltd.

Yan Cunzhang, general manager of the foreign cooperation unit under CNPC, told Dow Jones Newswires in December that CNPC's priority for this year is to raise local oil recovery rates.

CNPC aims to produce 1 million tons more crude oil this year than in 2007, or 20,082 barrels a day, the same growth it recorded in 2007 compared with 2006.

StatoilHydro has repeatedly tried to forge alliances with CNPC and PetroChina for upstream projects, but has lost out to rivals in international tenders.

Its only existing oil field in China - Lufeng 22-1 in the South China Sea - is due to be plugged around the end of this year when it reaches the end of its production life, Ole-Johan Lydersen, president of StatoilHydro's China operations, said in January.

BEIJING, March 26, 2008 (Dow Jones Newswires)