ConocoPhillips to Spend Up to $12B Offshore Norway
HOUSTON (Dow Jones) Mar. 15, 2010
ConocoPhillips (COP) has presented plans to the Norwegian government to further develop the North Sea Ekofisk South and Eldfisk offshore fields with an estimated investment of up to $12.2 billion.
The plans, submitted last week to the Norwegian Oil Ministry and posted on Conoco's Norwegian Web site on Friday, signal that the oil giant is still planning to boost investment in projects that can increase its oil production, which is seen by analysts as more profitable than natural gas output. It comes months after the company announced a sharp reduction in operations that included $10 billion in assets sales and a 12% reduction on its 2010 capital expenditure budget to $10.5 billion.
ConocoPhillips, the third largest U.S. oil company by market value after Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX), said final investment decisions for both fields will be made in 2011 and that the scale of investment could be $4.28 billion to $5.14 billion on Ekofisk South field and $6 billion to $7.1 billion at Eldfisk II.
Both fields are part of the Greater Ekofisk Area that ConocoPhillips operates and where it has a 35.1% interest. According to the company's 10-K filing with the U.S. Securities and Exchange Commission on Feb. 25, the Greater Ekofisk Area is composed of four producing fields: Ekofisk, Eldfisk, Embla and Tor, which had a combined production in 2009 of 92,000 barrels of liquids per day and 89 million cubic feet of natural gas per day, a 7% and 11% decline in oil and natural gas production, respectively, from 2008.
The new development is expected to increase recoverable reserves at Ekofisk South by about 157 million to 220 million barrels of oil equivalent. The project will also increase Eldfisk's output by 220 million to 283 million barrels of oil equivalent. The company said it was still working on more detailed estimates.
In a separate issue, ConocoPhillips also received approval from Norwegian Oil Minister Terje Riis-Johansen to build an accommodation platform at Ekofisk field. This is one of several investments in the Greater Ekofisk Area being planned.
Riis-Johansen said ConocoPhillips' project paves the way for 40 more years of production from Ekofisk, one of the most prolific fields in the North Sea. He said in statement posted on the ministry's Web site that the development would provide substantial tax revenue and be a major boost for oil supplies. The new platform will cost around $1.71 billion, the ministry said.
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