October 21, 2011 / 6:36 AM / 8 years ago

REFILE-UPDATE 5-Statoil in one of Norway's biggest oil finds

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* One of the largest discoveries ever off Norway

* Lightweight crude has “Champagne” quality - Statoil exec

* Statoil shares up 2.6 pct, partner Det Norske soars 47 pct

* Breakeven seen as low as $10 per barrel - analyst

By Walter Gibbs and Joachim Dagenborg

OSLO, Oct 21 (Reuters) - Norway’s Statoil hailed on Friday a discovery of new reserves, potentially the biggest oil find of 2011, saying it would pump “Champagne”-like crude at “crazy” rates to help arrest output declines from the mature North Sea oil province.

Statoil, whose shares jumped 3 percent on the news, said part of a newly discovered North Sea oilfield was twice as big as previously thought, bringing the overall dimensions to as much as 3.3 billion barrels.

Statoil’s executive vice president for exploration, Tim Dodson, said the newly upgraded oil reservoir might turn out 800,000 barrels per day (bpd), a level equal to OPEC member Qatar’s oil output.

The scale of the Aldous/Avaldsnes find has surprised the oil industry as many considered the North Sea’s major resources to have been pumped out, and it promises billions in future income for Norway and field partners including Statoil.

“It’s a fantastic find for Norway,” said Lennert Koch, analyst at oil consultant Wood Mackenzie. “I think this is quite an exceptional case. We’re talking about potentially the third biggest discovery in Norway ever.”

Statoil’s Dodson said test drilling in the Aldous Major South field discovered this summer has shown it contains 900 million to 1.5 billion barrels of recoverable oil equivalent, compared with the previously announced 400 million to 800 million barrels.

The reservoir is linked directly to Lundin Petroleum’s newly discovered field Avaldsnes, whose estimated size was quadrupled last month to between 800 million and 1.8 billion barrels.

“Aldous/Avaldsnes is a giant, and one of the largest finds ever on the Norwegian continental shelf,” Dodson said.

Statoil shares were up 2.6 percent at 1612 GMT, while shares in smaller Aldous partner Det Norske Oljeselskap had jumped 47 percent. Lundin Petroleum which like Statoil has a stake in both fields, was up 8.7 percent. Det Norske major shareholder Aker was up 18 percent.

‘WORLD CLASS’

In an interview, Dodson said the estimates assume that 50 to 60 percent of the field’s contents can be recovered but he said technological advances could push that to 75 percent - extremely high by the oil industry’s standards.

“Even the initial production rates are going to be very, very good because each well you put in there, especially in the best parts of the reservoir, are going to produce like crazy,” he said.

Aldous/Avaldsnes crude is also lightweight and simple to refine, he said, adding to its value.

“This is a world-class reservoir,” Dodson said. “When it reaches the refineries the oil will be characterised as belonging in the Champagne league.”

Combining the latest estimates for Aldous and Avaldsnes gives a range of 1.7 to 3.3 billion barrels of oil equivalent, making the discovery the largest on earth in 2011, according to Norwegian authorities.

The higher end would put the field, some 150 km (93 miles)west of Statoil’s headquarters in Stavanger, just behind the Statfjord and Ekofisk elephant fields in the all-time Norwegian continental shelf rankings.

FIRST OIL IN 2017

Statoil expects the first oil from the field to come in 2017 and that it will produce for at least 30 years.

“By 2020 it will be a large contributor to the overall production on the Norwegian continental shelf,” Dodson said.

He said Statoil and Lundin would develop Aldous and Avaldsnes as a single project that will likely require three or four installations above and below the water.

The oil could be piped to shore using the nearby Grane pipeline, though a new one may also be required, he said.

Arctic Securities oil analyst Trond Omdal said it was obvious even before Friday’s announcement that Aldous/Avaldsnes would be low-cost oil because of shallow water and lots of nearby infrastructure.

Friday’s bigger estimate, he said, means the crude can be produced for as little as $10 per barrel, including development and operating costs. The break-even cost for most new Norwegian fields in recent years has exceeded $50 per barrel, he added.

Erik Haugene, the CEO of Aldous partner Det Norske, told a news conference he would surprised if the break-even point exceeded $15 per barrel.

He also said Norwegian officials would likely appoint Statoil operator of the joint field, which will eventually get a single name, and that there was a good chance of finding oil at another adjacent oil prospect, Aldous Major North.

After the announcement, DnB NOR Markets raised its target price on Det Norske shares to 96 crowns from 78 crowns.

Oil production off Norway, the world’s eighth-largest oil exporter and the second-largest for gas, has been in decline for the last decade, with oil majors like ConocoPhillips , BP and ExxonMobil turning their focus to the Gulf of Mexico, Brazil and Angola.

Those trying to extend Norway’s hydrocarbon age have shifted attention north to the Norwegian Sea and the Barents Sea, but analysts said Aldous-Avaldsnes gives the relatively mature North Sea a new lease on life.

“This discovery will bring new interest to the North Sea,” Omdal at Arctic Securities said. “A whole new generation of Norwegians may see oil as an attractive career path.”

He projected that it would turn out 500,000 bpd by 2020, a level equal to a quarter of today’s Norwegian output.

That will not make up for the average five-percent annual drop in national production in recent years, he said, “but it will fill a huge part of the gap”.

If Aldous Major South and Avaldsnes together contain 3.3 billion barrels, their value at today’s market prices for Brent crude LCOc1 would total $360 billion, according to a Reuters calculation.

“This is clearly much larger that we had figured,” said John Olaisen of Carnegie.

Statoil is the operator of Aldous Major South and has a 40 percent interest. The partners are state-owned Petoro with 30 percent, Det Norske with 20 percent and Lundin with 10 percent. (Additional reporting by Terje Solsvik, Victoria Klesty and Henrik Stoelen; Editing by William Hardy and Jason Neely)

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