Cost-cutting and a demand for longer field lifespan will see Statoil look for subsea solutions at Snorre C
Statoil is abandoning plans for a new platform at its Snorre field offshore Norway in favour of a subsea solution that should boost recovery and cut costs. While this looks to be a sensible move, it also appears that stern warnings from the Norwegian Petroleum Directorate (NPD) have also been heeded.
In February Bjarne Bakken, Statoil’s vice president for the Snorre 2040 project, told Bloomberg that the company had decided against its plans to install a new drilling and processing platform at the field in order to boost its life expectancy.
Instead, he said that Statoil intended to pursue a subsea alternative, which should lead to a cost reduction of 30-40% from an initial estimate of 40 billion kroner (US$4.7 billion).
“We’ve concluded with our partners and the authorities that a subsea solution will have a larger economic potential than a platform solution,” he continued.
Originally, it was estimated that the platform could bring in 300 million additional barrels, a figure that has since been revised to 200 million. Despite its lower cost, Bakken went on to say that it was expected that the subsea programme would achieve the same target or exceed it by utilising the two existing platforms on the field.
“Both based on the market and further design optimisation, we can improve this [recovery rate],” he continued. “We’re also working to raise the volume extracted – that’s one of the positive things with a subsea solution.”
In November, Statoil executive Mette Halvorsen Ottoey told attendees at an energy conference that the Snorre 2040 plan was under consideration following a series of delays, and that a decision would be made before the following autumn.
“We are doing everything we can to look at the costs at that one [platform], and we are also considering if there might be a solution to use subsea,” she continued.
However, these comments came weeks after a warning from the Norwegian Petroleum Directorate (NPD) – the government agency that oversees the country’s oil and gas sector – which threatened producers that chose not to extract more costly barrels from their acreage with bans from future licencing rounds.
“There are rights and duties associated with having a position on the Norwegian Shelf,” said Bente Nyland, the head of the Norwegian Petroleum Directorate, at the time. “We don’t want companies that skim the cream. We will be very clear on that when we now consider awards in the next licensing round.”
Over the past few years, the Snorre 2040 plan has been pushed back several times as Statoil and its partners battled with the fallout of the collapse in oil prices. At the same time, the NPD has continually pressured for the project to go ahead, viewing it as a key part of Norway’s plan to offset declining production through enhanced oilfield recovery (EOR). This frustration prompted Oslo to warn the company could lose one of its Snorre licences if measures to improve output are not taken.
Despite frequent calls from bodies such as the Norwegian Oil and Gas Association (NOGA), an industry organisation representing firms such as Statoil, Total and Royal Dutch Shell, for tax breaks and incentives, Norway’s government has refused to offer any stimulus to encourage exploration and production. Instead, it has repeatedly stated that costs should be cut wherever possible if firms wished to remain competitive.
Statoil is now intending to make a decision on the development concept for the Snorre 2040 programme in the fourth quarter, with a final investment decision (FID) in 2017. At the same time, it has warned that there are “no guarantees” that it will come to fruition. With the project’s breakeven price point likely to be well above US$60 per barrel, there will be little appetite for a rapid conclusion. Further delays could well be on the cards, despite the NPD’s probable annoyance.