The Snøhvit partnership has concluded that the development of oil reserves associated with the Snøhvit gas field, located in the Barents Sea, is not economic. Further appraisal activities will not be pursued.
The plan for development and operation (PDO), approved in 2002, was drawn up solely around recovery of gas resources at Snøhvit because it was concluded that recovery of the field's oil zone would not be economically viable.
New reservoir knowledge, technological advancements as well as the Norwegian government's overall management plan for the Lofoten area and the Barents Sea, were key factors when Snøhvit licensees decided last summer to re-evaluate the possible development of associated oil reserves.
"The studies we have undertaken show that it still isn't possible to develop the oil reserves in a commercially viable manner", says Geir Pettersen, senior vice president for Statoil's Tromsø Patch business cluster, which includes Snøhvit.
Gas production from Snøhvit is scheduled to commence late in 2007. Production of the oil zone should ideally start as early as possible so that maximum oil can be recovered before the pressure in the reservoir becomes too low. This makes the timetable for a potential oil development particularly demanding.
"Even if current studies did support an economic development case, for such a timetable to be met, we would need to enter into binding agreements with suppliers as early as this year and before the technical foundation for a development was in place," says Mr Pettersen.
"In current market conditions, this would result in greater uncertainty surrounding the actual development costs and would not be commercially advisable.”
Statoil ASA is operator for the development and operation of Snøhvit with a 33.53% share. Other licensees are Petoro AS (30%), Total (18.4%), Gaz de France (12%), Hess (3.26%) and RWE Dea (2.81%).