A price for liquefied natural gas (LNG) of $3.40/MMBTU in 1996 dollars, net of transportation costs, will be needed to develop the first of the large gas finds in Norway's Barents Sea.
This is the view of Wood Mackenzie Consultants Ltd., Edinburgh, which says that while an estimated 145 million bbl of oil and 9.3 tcf of gas have been found off northern Norway, no discovery is commercial.
Norway's Den norske stats oljeselskap AS (Statoil) disclosed plans for a new study to develop Snohvit, the region's largest gas discovery, as a subsea development with multiphase pipeline to shore (see related story, this page).
Statoil estimates Snohvit gas reserves at 5.3 tcf. Wood Mackenzie reckons the find also has estimated oil and condensate reserves of 40 and 75 million bbl, respectively.
"Of the Barents Sea discoveries made to date," said Wood Mackenzie, "Snohvit is likely to be the first to be exploited, possibly with a full subsea solution, exporting gas to an onshore LNG plant for export by tanker.
"However, considerable technical and commercial issues remain to be resolved before any project will go ahead. An LNG price of $3.40/MMBTU might be required to make such a project viable."
Norway's incentives
The analyst notes that Norway's Ministry of Industry and Energy has responded to disappointing exploration results in the area, particularly for oil, by making some changes to license terms.
"The ministry is keen to encourage further exploration in the region," said Wood Mackenzie, "which Norwegian Petroleum Directorate estimates could contain up to 25% of Norway's remaining undiscovered reserves."
The ministry is expected to invite new applications for Barents Sea exploration licenses this month, said the analyst, with a deadline for application in January 1997 and license awards in March or April 1997.
"The key to any early development in the Barents Sea," said Wood Mackenzie, "is likely to hinge on the ability to make substantial oil discoveries.
"If significant exploration success is not made on the acreage to be awarded, it seems likely that oil company interest in the region will collapse completely. It would then be extremely difficult for the Norwegian authorities to regenerate activity once again at a later date."
Statoil and other Norwegian operators have pooled exploration data collected so far, and as many as three groups of companies are thought to be preparing to search for the key to discovering Barents Sea oil (OGJ, July 29, p. 40).
Copyright 1996 Oil & Gas Journal. All Rights Reserved.
