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STO to Export Johan Oil from Mongstad

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Norwegian energy giant Statoil ASA (STO) saw fluctuating investor reaction to its partners’ recommendation of exporting oil from its Johan Sverdrup field in the North Sea from Mongstad. While the stock price surprised with a 0.2% drop to touch $22.50 on the day of the announcement, it moved up 1.4% in the next trading session and again dropped 1.1% on Wednesday to close at $22.56 per share.

The export solution includes a separate 175-mile pipeline from Johan Sverdrup, landing of pipeline and an onshore route, as well as terminal modifications for Mongstad, which is subject to the final concept solution for Johan Sverdrup. Decisions regarding development and finance are expected later this year. In 2012, Statoil estimated Johan Sverdrup to have recoverable resources of 900 million to 1.5 billion barrels of oil equivalent.

The company took into consideration development costs, technical viability and plan risk. The decision was also based on an overall appraisal of health, safety and environment elements.

The preparation for the first part of oil transport from the Johan Sverdrup field was concluded in fall 2012. This was in relation to Gassco’s study for a complete solution for oil export from the Utsira High. A new pipeline from the Johan Sverdrup to the Mongstad or Sture oil terminal was planned, as the field was projected to generate large volumes.

This proposal was in sync with Statoil’s aim of ensuring that the terminal activity results in profitable oil value chains at Mongstad. The recommendation was the best solution possible for Johan Sverdrup and is not connected with where the oil is refined.

New volumes from the Aasen and Edvard Grieg fields will also be obtained by the Sture terminal. All these factors will facilitate good use of resources and higher infrastructure flexibility that will guarantee competitive landing of oil from existing and new fields on the Norwegian Continental Shelf.

Statoil carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the oil and gas sector include SM Energy Co. (SM), Abraxas Petroleum Corp. (AXAS) and Western Gas Partners LP (WES). All these stocks hold a Zacks Rank #1 (Strong Buy).

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