Statoil to Delay Barents Investment

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Norwegian oil major Statoil ASA (STO) has urged its partners to postpone the investment decision for its Johan Castberg project in the Norwegian Barents Sea owing to resource and political uncertainties.

Statoil continues to develop the resource base and growth plans for the project. But the uncertainty related to the resource estimate and investment level persists.

The sudden tax increase imposed by the Norwegian government has reduced the appeal of the future projects particularly that of the marginal fields and others that require infrastructure upgrades. These factors have made an assessment of the Johan Castberg project essential.

Earlier in 2013, the license partners had chosen a development concept for the project that comprised a new oil terminal at Veidnes in Finnmark County, Norway. Similar to the Snøhvit project, state aid regulations would be used to facilitate onshore landing of oil and gas in northern Norway. However, these plans have not been incorporated in the proposal presented to the concerned authority for approval. Thus, uncertainty related to the project still lingers.

The revised project estimates and the new ambiguity in the tax framework have made it important to contemplate the impact these may have on the development concept.

Located 240 kilometers north west of Hammerfest in PL 532 in Norway, Johan Castberg consists of the Skrugard and Havis discoveries made in 2011 and 2012, respectively. The field was initially estimated to contain recoverable reserves in the range of 400-600 million barrels of oil.

Statoil, the operator of PL 532, has a stake of 50%. The other partners Eni SpA (E) and Petoro hold 30% and 20% stakes, respectively. Currently, Statoil is drilling four exploration wells in the region around Johan Castberg with an aim to verify further resources to add strength to a potential development.

Statoil aspires to achieve an equity production of above 2.5 million barrels of oil equivalent per day in 2020, of which over 1.4 million barrels of oil equivalent per day is expected to come from the Norwegian Continental Shelf.

Statoil carries a Zacks Rank #5 (Strong Sell). ). However, Zacks Ranked #1 (Strong Buy) stocks – Enerplus Corporation (ERF) and Gulfmark Offshore, Inc. (GLF) appear more attractive as these are expected to outperform over the next few months.

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