Statoil ASA (STO) has ramped up the Norwegian Barents exploration campaign and raised its Arctic technology research budget by threefold.
As of now, Statoil’s exploration venture in the Barents – located in the Hammerfest basin, north of Finnmark County in northern Norway – involves participation of 89 exploration wells out of the total 94 drilled. The company now intends to boost the campaign by drilling nine additional Statoil-operated wells by next year.
Statoil remains upbeat about the Barents Sea venture following its Skrugard and Havis oilfield discoveries last year that are estimated to hold 400 million to 600 million barrels of oil equivalent. The company is expected to drill four wells at Nunatak, near Skrugard from December for six months. This campaign will continue with the drilling of two or three wells in the Hoop frontier exploration area further north, next year in summer. This marks the northernmost wells ever drilled in Norway.
The Norwegian giant aims to maintain its non-stop drilling activities in 2013 in the area, as it is not disturbed by sea ice because of a warm-water current that flows in from the North Atlantic. The Norwegian Barents is supposed to be the only year-round ice-free zone in the Arctic.
In contrast, Royal Dutch Shell Plc (RDS.A) faced difficulties for its drilling of its first exploration wells in the Chukchi Sea off Alaska due to sea ice and troubles in receiving Coast Guard certification for its oil spill recovery vessel. The U.K. behemoth now expects to complete only two of the five wells for the Chukchi and Beaufort Seas in 2012.
Meanwhile, Statoil has expressed that it has created a technology road map for its operations in the severe most Arctic areas. This includes trebling the existing Arctic research budget to NOK250 million ($34 million) in 2013 from NOK 80 million ($11 million) in 2012. The extended investment further fortifies Statoil’s supremacy in energy exploration and production in the region.
In May, Statoil and Russian state-owned oil company OAO Rosneft entered into an agreement to jointly explore and develop Russian offshore deposits in the Barents Sea and Sea of Okhotsk. The venture is expected to involve an investment of approximately $100 billion over decades.
The agreement calls for the exploration of the Perseevsky license in the Russian part of the central Barents Sea and three licenses — the Kashevarovsky, Lisyansky and Magadan-1 — north of Sakhalin island in the Sea of Okhotsk. Both parties intend to jointly explore, with Statoil holding 33.33% in each activity. Although Statoil has already completed drilling 89 wells in the Barents Sea, Rosneft has no offshore experience.
According to the U.S. Energy Information Administration, the Arctic region is expected to have more than 400 billion barrels equivalent of recoverable oil and gas yet to be discovered.
We remain upbeat on Statoil’s upstream initiatives and its significant discoveries in the mature North Sea as well as in the Barents Sea that reaffirm the potential of the Norwegian Continental Shelf.
Statoil retains a Zacks #2 Rank (short-term Buy rating).
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