Heidrun field goes on production off Norway

Layout of Heidrun Oil and Gas Field (70066 bytes)

A second oil and gas field is on stream in the Norwegian Sea off mid-Norway.

A group led by Conoco Norway Inc. and Norway's Den norske stats oljeselskap AS announced the Oct. 18 start of production from Heidrun field, citing the development project in the Haltenbank area as distinctive on several counts.

It marks industry's first use of a concrete tension leg platform, a titanium drilling riser, and a direct shuttle tanker loading system for oil shipments to shore. Three dedicated shuttle tankers equipped for submerged turret loading will carry oil to the Mongstad terminal in Norway.

Eventual sales of associated gas will feed a methanol plant to be built in mid-Norway as the country's first mainland development using offshore gas.

Conoco operated Heidrun for development, and Statoil took over as operator for production. With development cost pegged at 26.4 billion kroner ($4.2 billion), it is the single largest project undertaken by Conoco and its parent, DuPont.

Production schedule

Heidrun, a 1985 discovery, went on stream with one production well and six water injectors. Statoil plans to place additional wells on production, aiming for a flow buildup to a 200,000 b/d plateau in first quarter 1996 and to as much as 250,000 b/d with optimization of platform units.

Reserves are 750 million bbl of oil and 460 bcf of sales gas. The latter figure does not include the volume in a gas cap.

Statoil will reinject gas until deliveries start in late 1996 or early 1997 through a dedicated 16 in. pipeline to the methanol plant at Tjeldbergodden, Norway. The gas pipeline is to be laid in summer 1996.

Heidrun's gas reserves are among a number of resources put forward for development to meet Norway's gas sales contracts with European buyers. However, Oslo is likely to see other fields as more urgently needing development.

Economics

Mike Johnson, Conoco Norway president and managing director, called Heidrun "a good investment."

He figures development cost at about $5/bbl of oil equivalent. Operating costs during the next 5 years will average about $1/bbl, with another $2/bbl for transportation.

So even with oil prices as low as $8.60/bbl, Heidrun field development will break even. And at $12/bbl, the field will provide a pretax return of 7%. At today's oil prices, revenues will top 75 billion kroner ($12 billion) during the life of the field.

Johnson pointed out that the current estimate of $4.2 billion for Heidrun's development phase is less than a 5% increase from the 1991 master control estimate of $4 billion.

"More important," he said, "the entire Heidrun project has a significant upside to its profitability."

Here's why:

• Sales from the gas cap were not included in the project's economics because of uncertainty in timing. However, once gas infrastructure is in place in mid-Norway, Heidrun's gas cap reserves can be developed cheaply and sold on the European market "on a competitive basis."
• The field is likely to produce more oil than Conoco's original estimate of 750 million bbl. Data from predrilled wells and updated reservoir models suggest a higher oil recovery factor than originally thought.
• The Heidrun area holds several prospects that could extend plateau production or add future processing revenues.
• Platform space for an extra module as large as 5,000 metric tons can be used to develop satellite fields or expedite gas cap sales.

Heidrun partners are Statoil 76.875%, Conoco 18.125%, and Neste Petroleum AS 5%.

The combine filed its plan for development and operation in November 1989, projecting first oil for August 1995 based on development approval in 1990. Political and national policy issues had to be resolved before final approval. That resulted in delay of approval to 1991 by Norway's Storting (parliament).

Norske Shell AS's Draugen oil field was the first to go on stream in the Norwegian Sea. Draugen, also on the Haltenbank, began production in 1993 from a concrete platform in Block 6407/9. Copyright 1995 Oil & Gas Journal. All Rights Reserved.