StatoilHydro to Tender Big Oil Service Contract in November

LONDON (Dow Jones), Oct. 26, 2009

Norway's largest oil company StatoilHydro ASA said Monday it will place a big maintenance and modification contract for its Norwegian fields and plants on to the market next month.

The company is upbeat about the fall in rates and prices within some segments of the oil services sector.

"The decrease in both oil prices and economic growth give grounds for supplier reductions, and if lower prices are achieved, this may gradually lead to a decline in investment costs per barrel, thereby reducing break-even prices," StatoilHydro spokesman Ola Anders Skauby told Dow Jones Newswires. "As a result, a greater number of projects will be attractive, even on today's planning assumptions."

The company is preparing a five to seven-year package to support operations at most of its offshore oil and gas installations. Onshore installations, including the Kaarstoe gas processing plant and the Mongstad refinery, will also be included.

Skauby said StatoilHydro is in the final stages of prequalifiation and partner approval, and the tender is expected to be issued during November, with planned contract awards next summer.

The size of the contract--closely watched by the market after a lull in new tenders in the sector as oil companies scale back capital expenditure amid lower oil prices and tough credit conditions--is difficult to estimate, he said.

"It will depend on the activity level and approved budgets per license," Skauby said.

The company's existing maintenance and modification contract is valued at about five billion Norwegian kroner ($902.9 million) a year.

There will however be some changes to the new portfolio, with insulation, scaffolding and surface protection work taken out for tender in a separate process, while around NOK150 million of multidiscipline modification work will be newly included, making it hard to draw a direct price comparison.

"A typical maintenance and modification portfolio will consist of many small and medium size call offs, and a few larger call offs," Skauby said.

StatoilHydro, the product of a 2007 deal which saw Statoil buy Norsk Hydro's oil and gas assets, is set to change its name back to Statoil from Nov. 1.

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