Norway based Statoil ASA (STO) is planning to revive its North Sea venture with a £6 billion ($9.6 billion) investment. The project was shelved earlier this year due to the imposition of new tax legislations on North Sea oil production by the U.K.
Statoil had suspended developments of the Mariner and Bressay oilfields in the southeast of Shetland after a hike in supplementary tax (from 20% to 32%) was announced in the March budget. However, the Treasury took its decision back later following objections from the majority of oil and gas firms.
Consequently, Statoil decided to restart work on the North Sea fields, which are estimated to have combined reserves of approximately 640 million barrels. According to the company, developing these fields is an expensive proposition as it holds heavy oil, which requires a long procedure to be converted into light crude. The company will also require pioneering technology.
Statoil will make its final investment decision on Mariner by the end of 2012 and projects the field to commence production by the end of 2016. A final decision for investment in Bressay is expected toward the end of 2013 and the expected start-up period is 2017–2018.
The Mariner field has undergone numerous development studies by various operators since it was discovered 30 years ago. Statoil has planned a total of 145 reservoir targets for production at Mariner. The Bressay field has an estimated reserve of 200–300 million barrels of oil. To keep a close eye on operations in these fields, Statoil plans to set up a new operations centre in Aberdeen.
We believe production growth from international operations is a key component for the company’s overall annual upstream growth plans over the next few years. Hence, Statoil’s progress on these projects is a significant move.
Statoil holds a Zacks #3 Rank, which is equivalent to a Hold rating for a period of one to three months. For the long term, we maintain a Neutral rating on the stock. BP Plc (BP) and ConocoPhillips (COP) are major competitors of the company.
