Yesterday, Marathon Oil Corp. (MRO) announced the start-up of Norway’s Volund offshore oil project, marking the completion of its second major field development project in that country. This follows the Alvheim ramp-up in June 2008.

Marathon, through its wholly owned subsidiary Marathon Petroleum Company ( Norway ) LLC, holds a 65% operated interest in the Volund field, while Lundin Norway AS holds the remaining 35%.

The Volund development is the second tie-back to the Alvheim floating, production, storage and offloading (FPSO) vessel, following the StatoilHydro (STO) operated Vilje project. Oil from Volund will be produced via the Alvheim infrastructure, which has a maximum processing capacity of about 140,000 barrels per day (Bbl/d), although it is currently churning out about 20,000 Bbl/d above that level. As a result, the first Volund well will function as a swing producer until natural decline starts in the Alvheim fields, likely by the middle of 2010.

Located in block 24/9 of the Norwegian sector of the North Sea, and approximately 8 kilometers (5 miles) south of the Alvheim development, Volund is estimated to reach a maximum output of approximately 25,000 barrels of crude oil per day (16,000 Bbl/d net to Marathon). However, the timing of this output will depend on the available processing capacity on the Alvheim FPSO.

The ramp-up of the Volund development further underscores the strength of Marathon’s current development project pipeline, which provides for visible production growth over the coming years.

Houston, Texas-based Marathon Oil Corp. is a leading integrated oil and gas company with extensive upstream and downstream operations. The company’s upstream activities are located in eleven countries, including the U.S., Canada, U.K., Norway, Equatorial Guinea, Angola and Russia. It is also the fifth largest refiner and marketer of petroleum products in the U.S.

We currently rate Marathon shares as Neutral.

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