Statoil ASA (STO), a Norwegian state-owned integrated oil and gas company, said that it will invest 20 billion kroner ($3.41 billion) for further development of Norway’s largest gas field, Troll. The development includes more wells and pipelines.
The company also said that the main purpose of this investment is to increase oil production from this field. Management is targeting an oil recovery rate of 50% by 2020 from the current 39%.
Troll is a natural gas and oil field in the Norwegian sector of the North Sea. Though this is primarily a natural gas field, it also possesses significant quantities of oil.
Statoil is the operator of the block and holds a 30.6% interest. Other partners are Norway’s state-owned Petoro (with a 56% interest), Royal Dutch Shell (RDS.A, 8.1%), France’s Total (TOT, 3.7%) and ConocoPhillips (COP, 1.6%).
Though Statoil is the second largest supplier of natural gas in Europe, management has taken a conservative approach for gas this year, given the uncertainty regarding European industrial gas demand.
Despite maintaining a positive long-term view on the future competitiveness of gas, Statoil is wary of an uncertain outlook in the short term. Keeping this in mind, the company has focused on the strategy of delivering value through more oil. This investment for oil is a case in point. Price of Statoil ADRs rose nearly 2% to $23.20 at Tuesday’s closing.
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